Income and Corporation Taxes Act 1988

Calculation of unindexed gain

2 (1) Where there is a material disposal, there shall first be determined for the purposes of this Part of this Schedule the amount (if any) which, in accordance with the provisions of this paragraph, is the unindexed gain accruing to the person making the disposal.

(2) Subject to section 757(3) to (6) and paragraph 3 below, the unindexed gain accruing on a material disposal is the amount which would be the gain on that disposal for the purposes of the 1979 Act if it were computed—

(a) without regard to any charge to income tax or corporation tax by virtue of section 761; and

(b) without regard to any indexation allowance on the disposal under Chapter III of Part III of the [1982 c. 39.] Finance Act 1982.

3 (1) If the amount of any chargeable gain or allowable loss which (apart from section 763) would accrue on the material disposal would fall to be determined in a way which, in whole or in part, would take account of the indexation allowance on an earlier disposal to which paragraph 2 of Schedule 13 to the Finance Act 1982 (disposals on a no gain/no loss basis) applies, the unindexed gain on the material disposal shall be computed as if—

(a) no indexation allowance had been available on any such earlier disposal; and

(b) subject to that, neither a gain nor a loss had accrued to the person making such an earlier disposal.

(2) If the material disposal forms part of a transfer to which section 123 of the 1979 Act (roll-over relief on transfer of business) applies, the unindexed gain accruing on the disposal shall be computed without regard to any deduction which falls to be made under that section in computing a chargeable gain.

(3) If the material disposal is made otherwise than under a bargain at arm’s length and a claim for relief is made in respect of that disposal under section 79 of the [1980 c. 48.] Finance Act 1980 (relief for gifts), that section shall not affect the computation of the unindexed gain accruing on the disposal.

(4) Where, in the case of an insurance company carrying on life assurance business, a profit arising from general annuity business and attributable to a material disposal falls (or would but for the reference to offshore income gains in section 437(2) fall) to be taken into account in the computation under section 436, the unindexed gain, if any, accruing to the company on the disposal shall be computed as if section 31(1) of the 1979 Act (exclusion of certain sums in computing chargeable gain) did not apply.

(5) Notwithstanding section 29 of the 1979 Act (losses determined in like manner as gains) if, apart from this sub-paragraph, the effect of any computation under the preceding provisions of this Part of this Schedule would be to produce a loss, the unindexed gain on the material disposal shall be treated as nil; and accordingly for the purposes of this Part of this Schedule no loss shall be treated as accruing on a material disposal.

(6) Section 431 has effect in relation to sub-paragraph (4) above as if it were included in Chapter I of Part XII.