Commentary

C2.602 Computation of gains and losses

Capital gains tax
Capital gains tax | Commentary

C2.602 Computation of gains and losses

Capital gains tax | Commentary

C2.602 Computation of gains and losses

For disposals after 5 April 1988, assets which were acquired by their owner on or before 31 March 1982 are deemed to have been disposed of by him on that date and immediately reacquired at their then market value1. Thus, the expenditure allowable to the owner under TCGA 1992, s 38(1)(a) (see C2.202–C2.205) is the market value of the asset at 31 March 1982. 'Market value' is not specially defined for this purpose and therefore takes its normal meaning for capital gains tax purposes2. There are restrictions applying for corporation tax purposes3 on the substitution of market value4.

The effect of there having been a deemed acquisition of the asset on 31 March 1982 means that any expenditure incurred before that date in respect of enhancement5 or preservation or establishing title6 falls out of account. The position is unclear in relation to such expenditure incurred on 31 March 1982; unless the deemed disposal is treated as having occurred at the end of that day, such expenditure would not necessarily fall out of account.

The indexation allowance in respect of a disposal after 5 April 1988 of an asset held at 31 March 1982 is generally computed by reference to the market value of the asset at that date. However, if the indexation allowance computed by reference to actual expenditure would be greater, the greater amount applies, except where an election has been made to disapply the restrictions on

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