Finance Act 1983

The indexation allowanceU.K.

5(1)Where an election has been made under this Schedule, the following provisions of this Schedule have effect in place of the provisions of section 87 of the 1982 Act for the purpose of computing the indexation allowance on a disposal to which section 86 of that Act applies of the single asset (in the following provisions of this Schedule referred to as “the holding”) which by virtue of paragraph 3(3) above results from the election.

(2)On any disposal of the holding falling within subparagraph (1) above, other than a disposal of the whole of it,—

(a) the unindexed and indexed pools of expenditure shall each be apportioned between the part disposed of and the remainder in the same proportions as, under the principal Act, the relevant allowable expenditure is apportioned; and

(b)the indexation allowance is the amount by which the portion of the indexed pool which is attributed to the part disposed of exceeds the portion of the unindexed pool which is attributed to that part.

(3)On a disposal falling within subparagraph (1) above of the whole of the holding, the indexation allowance is the amount by which the indexed pool of expenditure at the time of the disposal exceeds the unindexed pool of expenditure at that time.

6(1)Subject to subparagraph (2) below, in relation to the holding, the unindexed pool of expenditure is at any time the amount which would be the aggregate of the relevant allowable expenditure in relation to a disposal of the whole of the holding occurring at that time.

(2)Where any item of the relevant allowable expenditure referred to in subparagraph (1) above was incurred after the time at which the securities to which it relates were acquired, it shall not be taken into account for the purpose of determining the unindexed pool of expenditure at any time before the expiry of the period of twelve months beginning on the date on which it was incurred; but at the expiry of that period the unindexed pool of expenditure shall be increased, subject to subparagraph (3) below, by the addition of a sum equal to it.

(3)If, before the expiry of the period of twelve months referred to in subparagraph (2) above, there is a disposal of any of the securities to which the item of relevant expenditure referred to in that subparagraph relates, only the portion of that expenditure which is attributable to the securities which are not so disposed of shall be added to the unindexed pool of expenditure by virtue of subparagraph (2) above.

(4)If, by virtue of any enactment, any item of the relevant allowable expenditure referred to in subparagraph (1) above falls to be reduced by reference to a relevant event, within the meaning of paragraph 4 of Schedule 13 to the 1982 Act, occurring after the time at which the securities to which it relates were acquired, that reduction shall not be taken into account for the purpose of determining the unindexed pool of expenditure until the expiry of the period of twelve months beginning on the date of the relevant event in question.

(5)If, before the expiry of the period of twelve months referred to in subparagraph (4) above, there is a disposal of any of the securities to which the item of relevant expenditure referred to in that subparagraph relates, the amount by which the unindexed pool of expenditure falls to be reduced at the expiry of that period shall itself be reduced so that only that portion of the reduction which is attributable to the securities which are not so disposed of shall then be made in the unindexed pool of expenditure.

(6)Subsection (5) of section 87 of the 1982 Act (date on which expenditure was incurred) and any provision of Schedule 13 to that Act which, in particular circumstances, displaces that subsection shall apply for the purposes of subparagraph (2) above as they apply for the purpose of computing the indexation allowance in accordance with that section.

7(1)The provisions of this paragraph have effect, subject to paragraphs 9 and 10 below, for determining, in relation to the holding, the indexed pool of expenditure at any time.

(2)The indexed pool of expenditure shall come into being at the time that the holding comes into being and shall at that time consist of the aggregate of—

(a)the unindexed pool of expenditure at that time; and

(b)any indexation allowance which, by virtue of paragraph 7(3) of Schedule 13 to the 1982 Act (options), would have applied to a disposal of the whole of the holding at that time.

(3)Any reference in the following provisions of this Schedule to an operative event is a reference to any event (whether a disposal, the expiry of a period of twelve months from an acquisition or otherwise) which has the effect of reducing or increasing the unindexed pool of expenditure attributable to the holding.

(4)Whenever an operative event occurs—

(a)there shall be added to the indexed pool of expenditure the indexed rise, as calculated under paragraph 8 below, in the value of that pool since the last operative event or, if there has been no previous operative event, since the pool came into being; and

(b)if the operative event results in an increase in the unindexed pool of expenditure then, in addition to any increase under paragraph (a) above, the same increase shall be made to the indexed pool of expenditure;

(c)if the operative event is a disposal resulting in a reduction in the unindexed pool of expenditure, then, whether or not it is a disposal to which section 86 of the 1982 Act applies, the indexed pool of expenditure shall be reduced in the same proportion as the unindexed pool is reduced; and

(b)if the operative event results in a reduction in the unindexed pool of expenditure but is not a disposal, the same reduction shall be made to the indexed pool of expenditure.

(5)Where the operative event is a disposal to which section 86 of the 1982 Act applies—

(a)any addition under paragraph (a) of subparagraph (4) above shall be made before the calculation of the indexation allowance under paragraph 5 above; and

(b)the reduction under paragraph (c) of that subparagraph shall be made after that calculation.

8(1)At the time of any operative event, the indexed rise in the indexed pool of expenditure is a sum produced by multiplying the value of that pool immediately before the event by a figure expressed as a decimal and determined, subject to subparagraphs (2) and (3) below, by the formula—

(2)if RE, as defined in subparagraph (1) above, is equal to or less than RL, as so defined, the indexed rise is nil.

(3)If the figure determined in accordance with the formula in subparagraph (1) above would, apart from this subparagraph, be a figure having more than three decimal places, it shall be rounded to the nearest third decimal place.