CG17481 - Indexation: example: part-disposal

1 June 1982 Y acquires office premises for £100,000.

1 June 1985 premises improved by spending £25,000 on car parking and an entrance.

1 June 1988 part of premises sold for £45,000, the part retained is worth £180,000.

1 June 1990 rest of premises sold for £160,000.

FIRST DISPOSAL

The part-disposal formula, see CG12731, gives

  • 45,000 divided by (180,000 plus 45,000)

This is 1/5

- - - £
- Disposal proceeds - 45,000
Less Proportion of cost 1/5 of 100,000 20,000 -
- - 1/5 of 25,000 5,000 25,000
- Unindexed gain - 20,000
Less Indexation 20,000 at 0.302 6,040 -
- - 5,000 at 0.117 585 -
- INDEXED GAIN - 13,375
The residual expenditure - 80,000 on 1 June 1982 -
- - 20,000 on 1 June 1985 -

SECOND DISPOSAL

- -   - £
- Disposal proceeds - - 160,000
Less Cost (residual expenditure) - 80,000 -
- - - 20,000 100,000
- Unindexed gain - - 60,000
Less Indexation 80,000 at 0.548 43,840 -
- - 20,000 at 0.328 6,560 50,400
- INDEXED GAIN - - 9,600