HMRC corrects CG51910 indexation note, deletes worked example

HMRC has corrected the indexation note on its Capital Gains Manual page for apportioning cost in a 1982 holding (CG51910) and deleted the page's entire worked exampleGOV. The note previously told readers that companies and other concerns within the charge to Corporation Tax were not affected by the withdrawal of indexation allowance.GOV It now states that indexation allowance is only available up to December 2017 for Corporation Tax purposes.GOV Anyone who relied on the old wording when computing a company's chargeable gain should re-check the computation against the frozen allowanceGOV.

The December 2017 cut-off reflects the freezing of the capital gains indexation allowance from 1 January 2018GOV: where a company or organisation makes a capital gain on or after that date, the allowance is calculated up to December 2017GOV. The corrected page otherwise restates the unchanged boundaries: neither indexation allowance nor taper relief applies to disposals on or after 6 April 2008 for taxpayers within the charge to Capital Gains Tax, and indexation had previously been frozen at April 1998. For the 1982 holding itself, the surviving guidance keeps the core apportionment rule that additional expenditure on a rights issue forms part of total base cost, with indexation allowance given only from the date of payment.

The deleted worked example had walked through a full apportionment: 1,000 25p shares bought in November 1978, a 1-for-4 rights issue, a 2-for-1 bonus issue, further rights issues and a part-disposal of 3,000 shares for £12,000, with a section 35(5) election out of the kink test and a 31 March 1982 value of 123.5p per share. It showed indexation applied separately to each tranche of expenditure from the date it became payable, producing a chargeable gain of £5,692, and cross-checked the result with the Extel adjustment factor of 1.99643 for the shares plus post-October 1987 indexation of 0.053, giving £5,693. That illustration, including the Extel check and the reference to CG52050, no longer forms part of the page.GOV

Practitioners computing a 1982-holding apportionment therefore lose a ready-made template for laying out tranche-by-tranche indexation and the Extel cross-check, and should verify any retained working against the current manual. The page now points readers to CG17207 onwards for indexation allowance and CG17895 onwards for taper relief.

Legal basis: the page applies the indexation rules in the Taxation of Chargeable Gains Act 1992 as frozen for Corporation Tax purposes from 1 January 2018.