LLM8240 - Capital gains: Names: indexation and taper relief

Indexation

For disposals of assets on or after 6 April 1998, the RPI for April 1998 will be used to determine the indexation allowance due, regardless of the actual date of disposal. Assets acquired after 6 April 1998 will not benefit from any indexation allowance on disposal. The existing restrictions which ensure that indexation allowance cannot create or increase any loss on disposal will still apply.Indexation on syndicate capacity

For disposals of syndicate capacity, the cost of the capacity for indexation purposes is the price paid for prospective capacity when the Name first joined the syndicate in question, plus the cost of any further acquisitions of capacity in that syndicate. Before the Syndicate Pre- emption Byelaw was introduced, there was no cost to begin underwriting on any particular syndicate. This means that where Names first underwrote on a syndicate in 1995 or earlier, no price was paid for capacity so indexation on capacity acquired for nil cost will be nil.Taper relief

Indexation for individuals was replaced by taper relief as part of the CGT reforms in FA98. The rules for taper relief are given in TCGA92/S2A and TCGA92/SCHA1. For gains on disposals on or after 6 April 1998, the amount of any gain chargeable to CGT is tapered according to the number of complete years the asset has been held. For assets held at 6 April 1998, the holding period begins on that date. An additional one year of ownership is added to the holding period for all assets acquired before 17 March 1998 and still held at 6 April 1998, regardless of the actual date of acquisition. See CG17895 onwards for full details of taper relief (LLM10000).

The amount of taper varies depending on whether the asset is a business asset or a non- business asset.

Syndicate capacity is a business asset for taper relief purposes. An asset held to support underwriting as part of an ancillary trust fund is treated as a non-business asset, unless the asset is also used for some other, non Lloyd’s, business purpose.Abolition of indexation and taper relief

These reliefs were abolished by FA08 for disposals on or after 6 April 2008 as part of a major capital gains tax reform package.