CG17515 - Indexation: example: asset held at 31 March 1982
E Ltd purchased a ship in 1980 for 拢2,000,000.
The market value on 31 March 1982 was 拢1,600,000.
It was sold in March 1993 for 拢800,000.
The net capital allowances were 拢1,200,000.
Because the loss by reference to original cost is clearly larger than the loss under the rebasing rules, the `kink test鈥� 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)).
| - | - | - | 拢 |
|---|---|---|---|
| - | 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) |