CG16740 - Introduction and computation: rebasing to 31 March 1982: kink test - examples
Example 1 - rebasing gives greater gain
Example 2 - rebasing gives greater loss
Example 3 - rebasing creates a loss
Example 4 - no gain or loss
Example 5 - disposal following no gain/no loss transfer
Example 6 - gain rolled over before 31 March 1982
Example 1 - rebasing gives greater gain
A company acquired an asset costing £8,000 on 1 March 1980. 31 March 1982 market value £7,000. Asset sold (at arm's length) for £26,000 on 6 March 2013.
REBASED GAIN
- | - | - | £ |
|---|---|---|---|
- | Disposal proceeds | - | 26,000 |
less | Cost (value at 31 March 1982) | - | 7,000 |
- | Unindexed gain | - | 19,000 |
Less | Indexation | 8,000 x 2.131 | 17,048 |
- | Gain | - | 1,952 |
GAIN ON OLD RULES
- | - | - | £ |
|---|---|---|---|
- | Disposal proceeds | - | 26,000 |
less | Cost (1 March 1980) | - | 8,000 |
- | Unindexed gain | - | 18,000 |
Less | Indexation | 8,000 x 2.131 | 17,048 |
- | Gain | - | 952 |
Note: Indexation is based on the higher of relevant allowable expenditure before 31 March 1982 and 31 March 1982 value, see CG16732.
Chargeable gain = 952
Example 2 - rebasing gives greater loss
A company acquired an asset costing £14,000 on 6 April 1964. 31 March 1982 market value £20,000. Asset sold (at arm's length) for £10,000 on 6 March 2013.
REBASED LOSS
- | - | - | £ |
|---|---|---|---|
- | Disposal proceeds | - | 10,000 |
less | Cost (value at 31 March 1982) | - | 20,000 |
- | Unindexed loss | - | (10,000) |
Less | Indexation | 20,000 x 2.131 | 42,620 |
- | Loss | - | (52,620) |
LOSS ON OLD RULES (no rebasing election made)
- | - | - | £ |
|---|---|---|---|
- | Disposal proceeds | - | 10,000 |
less | Cost (6 April 1964) | - | 14,000 |
- | Unindexed loss | - | (4,000) |
Less | Indexation | 20,000 x 2.131 | 42,620 |
- | Loss | - | (46,620) |
- | Time apportionment | £46,620 x 57 11/12 / 58 11/12= | (45,828) |
Note: The loss to be compared with the rebased loss is the loss after time-apportionment. See also the note to Example 1 at CG16740 regarding indexation.
Allowable loss = (45,828)
Example 3 - rebasing creates a loss
A company purchased an asset costing £2,000 on 1 May 1967. 31 March 1982 market value £8,000. Asset sold (at arm's length) for £24,000 on 6 March 2013.
REBASED LOSS
- | - | - | £ |
|---|---|---|---|
- | Disposal proceeds | - | 24,000 |
less | Cost (value at 31 March 1982) | - | 8,000 |
- | Unindexed gain | - | 16,000 |
Less | Indexation | 8,000 x 2.131 | 17,048 |
- | Loss | - | (1,048) |
GAIN ON OLD RULES
- | - | - | £ |
|---|---|---|---|
- | Disposal proceeds | - | 24,000 |
less | Cost (on 1 April 1967) | - | 2,000 |
- | Unindexed gain | - | 22,000 |
Less | Indexation | 8,000 x 2.131 | 17,048 |
- | Gain | - | 4,952 |
See the note to Example 1 at CG16740 regarding indexation.
As there is a rebased loss but a gain on the old rules, neither a gain nor a loss is deemed to arise.
Example 4 - no gain or loss
A company purchased an asset costing £2,000 on 1 May 1967. 31 March 1982 market value £8,000. Asset sold (at arm's length) for £19,048 on 6 March 2013.
GAIN ON OLD RULES
- | - | - | £ |
|---|---|---|---|
- | Disposal proceeds | - | 19,048 |
less | Cost (on 1 May 1967) | - | 2,000 |
- | Unindexed gain | - | 17,048 |
Less | Indexation | 8,000 x 2.131 | 17,048 |
- | - | - | Nil |
As neither a gain nor a loss arises on the old rules, neither a gain nor a loss is deemed to arise following rebasing.
Example 5 - disposal following no gain/no loss transfer
Asset cost £8,000 on 1 March 1980. 31 March 1982 market value £7,000. Asset sold to a company in same group for £16,000 on 6 April 1992.
These are the same dates and amounts as in CG16740. As a disposal between companies in the same group is is deemed to be at no gain/no loss, see CG45200+, then this is a specified no gain/no loss disposal, see CG16880.
The second company is to be treated as acquiring the asset for £13,976 (that is, cost £8,000 plus indexation allowance £5,976) and rebasing will apply on any subsequent disposal of the asset by her.
Example 6 - gain rolled over before 31 March 1982
Asset A was sold in 1980 for £1,000 realising a gain of £500.
A company acquired asset B in 1981 for £2,000 and a CGTA79/S115 (now TCGA92/S152) roll-over relief claim was made reducing its cost for CGT purposes to £1,500.
Asset B was sold in March 2013 for £15,000 The market value of asset B at 31 March 1982 was £3,000.
REBASED GAIN
- | - | - | £ |
|---|---|---|---|
- | Disposal proceeds | - | 15,000 |
less | Cost (market value at 31 March 1982) | - | 3,000 |
- | Unindexed gain | - | 12,000 |
Less | Indexation | 3,000 x 2.131 | 6,393 |
- | Gain | - | 5,607 |
Note: No adjustment is made to the 31 March 1982 market value of asset B for the gain on asset A which was rolled over before 31 March 1982 against the acquisition cost of asset B.
GAIN ON OLD RULES
- | - | - | £ |
|---|---|---|---|
- | Disposal proceeds | - | 15,000 |
less | Cost 1981 | 2,000 | - |
- | Deduct gain on asset A rolled over | 500 | 1,500 |
- | Unindexed gain | - | 13,500 |
less | Indexation | 3,000 x 2.131 | 6,393 |
- | Gain | - | 6,657 |
- | Chargeable gain | - | 5,607 |