Part III

Income Tax, Corporation Tax and Capital Gains Tax
Chapter III

Capital Gains

Calculation of indexation allowance.
87
1
The provisions of this section have effect for the purpose of computing the indexation allowance on a disposal to which section 86 above applies.
2
The indexation allowance is the aggregate of the indexed rise in each item of relevant allowable expenditure ; and, in relation to any such item of expenditure, the indexed rise is a sum produced by multiplyiing the amount of that item by a figure expressed as a decimal and determined, subject to subsections (3) and (4) below, by the formula (RD-RI)PRI where—
RD is the retail prices index for the month in which the disposal occurs ; and
RI is the retail prices index for March 1982 or the month which is the twelfth month after that in which the expenditure was incurred, whichever is the later.
3
If, in relation to any item of expenditure,—
a
the expenditure is attributable to the acquisition of relevant securities, within the meaning of section 88 below, which are disposed of within the period of ten days beginning on the day on which the expenditure was incurred, or
b
RD, as defined in subsection (2) above, is equal to or less than RI, as so defined,
the indexed rise in that item is nil.
4
If, in relation to any item of expenditure, the figure determined in accordance with the formula in subsection (2) above would, apart from this subsection, be, a figure having more than three decimal places, it shall be rounded to the nearest third decimal place.
5
For the purposes of this section—
a
relevant allowable expenditure falling within paragraph (a) of subsection (1) of section 32 of the Capital Gains Tax Act 1979 shall be assumed to have been incurred at the time when the asset in question was acquired or provided; and
b
relevant allowable expenditure falling within paragraph (b) of that subsection shall be assumed to have been incurred at the time when that expenditure became due and payable.
See Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), Sch. 28 para. 2(2) re computation of offshore income gains
See—Finance Act 1988 (c. 39, SIF 107:2), s. 113Finance Act 1990 (c. 29, SIF 40:1), s. 54
See—Finance Act 1983 (c. 28), s. 34 and Sch. 6 para. 5(1)Finance Act 1985 (c. 54), s. 68(3)(b) and Sch. 19 para. 11(1)
See Finance Act 1988 (c. 39, SIF 107:2)
,
Sch. 11 para. 1(2)
S. 87(2) applied (with modifications) (16.1.1992) by S.I. 1992/58, art. 9, Sch. 2 para. 12(1)
Words repealed by Finance Act 1985 (c. 54), ss. 68, 98(6), Schs. 19 Pt. I and 27 Pt. VII for disposals made on or after 6 April 1985 or 1 April 1985 for companies, 2 July 1986 for gilt-edged securities (Capital Gains Tax Act 1979 (c. 14, SIF 63:2) Sch. 2) and qualifying corporate bonds (Finance Act 1984 (c. 43, SIF 40:1) s. 64), or 28 February 1986 for other securities within the meaning of Finance Act 1985 (c. 54) Part II Ch. IV
See Finance Act 1985 (c. 54), s. 68(3)(c) and Sch. 19 para. 18(4)
S. 87(3)(a) substituted by Finance Act 1985 (c. 54), s. 68 and Sch. 19 Pt. I for disposals made on or after 6 April 1985, or 1 April 1985 for companies, or 28 February 1986 for securities within the meaning of Finance Act 1985 (c. 54) Part II Ch. IV other than gilt-edged securities (Capital Gains Tax Act 1979 (c. 14, SIF 63:2) Sch. 2) and qualifying corporate bonds (Finance Act 1984 (c. 43, SIF 40:1) s. 64), which are not affected
See Finance Act 1985 (c. 54), s. 68(3)(a) and Sch. 19 para. 7(3)
1979 c. 14.