CG17515 - Indexation: example: asset held at 31 March 1982
E Ltd purchased a ship in 1980 for £2,000,000.
The market value on 31 March 1982 was £1,600,000.
It was sold in March 1993 for £800,000.
The net capital allowances were £1,200,000.
Because the loss by reference to original cost is clearly larger than the loss under the rebasing rules, the `kink test’ does not substitute the actual loss for the loss based on the 31.3.82 value. See CG16732. Because the asset is plant and machinery, any election made under TCGA92/S35 (5) is disregarded, (TCGA92/SCH3/PARA7 (2)(a)).
| - | - | - | £ |
|---|---|---|---|
| - | Disposal proceeds | - | 800,000 |
| Less | Market value 31.3.82 | 1,600,000 | - |
| - | Deduct capital allowances | 1,200,00 | 400,000 |
| - | Unindexed gain | - | 400,000 |
| Less | Indexation | - | - |
| - | Cost | 2,000,000 | - |
| - | Capital allowances | 1,200,000 | 602,400 |
| - | - | 0.753 x 800,000 | - |
| - | INDEXED LOSS | - | (202,400) |