CG14200 - Computation: introduction

Capital gains computations take the form:

Disposal proceeds                               A

LESS Cost                           B

Other allowable costs   C

Unindexed gain                                        D

LESS Indexation                E

CHARGEABLE GAIN                              F

NOTE. If a taxpayer is within the charge to Capital Gains Tax, neither indexation allowance nor taper relief apply to disposals of assets on or after 6 April 2008. Previously indexation allowance had been frozen at April 1998. Companies and other concerns within the charge to Corporation Tax are not affected by these changes. For indexation allowance see CG17207+ and for taper relief see CG17895+.

To compute the gain or loss accruing on the disposal of an asset you need to know

·         the date of disposal or deemed disposal – see CG14250+

·         the consideration or deemed consideration for the disposal – see CG14480+

·         the allowable expenditure – see CG15150

·         the date of acquisition and of any subsequent expenditure.

Losses

The amount of a loss accruing on the disposal of an asset is computed in the same way as the amount of a gain, with certain specific exceptions. These are covered in the relevant paragraphs in the Losses section, see CG15800+. 

Rounding

A Press Release of 18 May 1993 announced that subject to certain conditions the Revenue would accept tax computations rounded to the nearest £1,000. The purpose of the practice is to reduce the compliance burden on large businesses which produce their statutory accounts in round thousands.

This practice applies only to computations of business profits. Rounding is not acceptable in computations where the rounding would impede the proper application of the relevant legislation.

Nor may it be applied where it would normally be necessary to go back to the underlying records to do the computation. In such circumstances, there would be no reduction in the compliance burden in allowing the use of round sums.

You should not accept rounding in computations of chargeable gains. It will be necessary for taxpayers to refer back to their underlying documentation for the acquisition cost itself. And the precise dates on which expenditure is incurred are needed for indexation allowance purposes. You may however accept rounding for the incidental costs of acquisition and disposal.

*Indexation

If a taxpayer is within the charge to Capital Gains Tax, neither indexation allowance nor taper relief apply to disposals of assets on or after 6 April 2008. Previously indexation allowance had been frozen at April 1998.

For Companies and other concerns within the charge to Corporation Tax indexation allowance was frozen at 31 December 2017.

For indexation allowance see CG17207+ and for taper relief see CG17895+.