CG17489 - Indexation: example: indexation and gifts hold-over relief
5 November 1982 A acquires an oil painting at arm's length for cash £10,000.
5 July 1986 he gives the picture to B, his son. The market value of the picture at that time is agreed to be £15,000.
5 September 1988 B sells the picture at arm's length for £20,000.
A's computation is:-
|
|
£ |
||
|
|
Deemed proceeds (market value) |
15,000 |
|
|
LESS |
Cost |
10,000 |
|
|
Unindexed gain |
5,000 |
||
|
LESS |
Indexation |
10,000 x 0.180 |
1,800 |
|
INDEXED GAIN |
3,200 |
||
B claims gifts hold-over' relief under the rules which were in force in 1986, see CG66730+, on his gain of £3,200.
B's allowable expenditure is (£15,000 - £3,200) = £11,800 for all purposes. and the computation is therefore:
|
|
£ |
||
|
|
Disposal proceeds |
20,000 |
|
|
LESS |
Cost (as reduced) |
11,800 |
|
|
|
Unindexed gain |
8,200 |
|
|
LESS |
Indexation |
11,800 x 0.112 |
1,322 |
|
INDEXED GAIN |
6,878 |
||
The same principles apply to cases where the asset was a replacement asset used in a business, and roll-over relief was claimed.
