OT30080 - Capital Gains

Computational Points. Indexation. Capital Allowances. Loss Restriction.

For disposals on or after 1 April 1985, FA85\s68(4) and FA85\s68(5) allowed companies to claim that indexation allowance be computed by reference to the market value on 31 March 1982 of assets held at that date. As the legislation then stood this "deemed acquisition cost" could not be reduced for capital allowances which had been, or could have been, made on the original cost for the purpose of the loss restriction rules now at TCGA92\s41(2).

FA88\s62(4) was therefore enacted with retrospective effect for disposals of oil licences relating to undeveloped areas between 1 April 1985 and 5 April 1988. It restricted the March 1982 value used in computing indexation allowance by reference to capital allowances made from 1 April 1982 onwards on the cost of providing the asset in applying the TCGA92\s41(2) loss restriction.

For disposals on or after 6 April 1988, the general rules at TCGA92\s55 extend the restriction of the March 1982 value by reference to any capital allowances made in respect of the cost.

The adjustment is made whether or not the consideration has a deemed nil value under TCGA92\s194(2).