Finance Act 1998

125Indexation and share pooling etc

(1)In subsection (1) of section 110 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (indexation allowance for section 104 holdings), for “This” there shall be substituted “For the purposes of corporation tax this”.

(2)After that section there shall be inserted the following section—

“110AIndexation for section 104 holdings: capital gains tax

(1)For the purposes of capital gains tax (but not corporation tax) where—

(a)there is a disposal on or after 6th April 1998 of a section 104 holding, and

(b)any of the relevant allowable expenditure was incurred before 6th April 1998,

this section applies, in place of section 54 and subject to section 105, for computing the indexation allowance.

(2)There shall be an indexed pool of expenditure and subsection (2) or, as the case may be, subsection (3) of section 110 shall apply by reference to that pool in relation to the disposal as it would apply (by reference to the pool for which that section provides) for the purposes of corporation tax.

(3)The amount at any time of the indexed pool of expenditure shall be determined by—

(a)taking the amount which would, under section 110 and section 114, have been the amount of the indexed pool of expenditure for the purposes of a disposal of the whole of the holding at the end of 5th April 1998; and

(b)making any adjustments by way of increase or reduction that would be required to be made by virtue of subsection (8) of section 110 on the assumptions set out in subsection (4) below.

(4)Those assumptions are—

(a)that the indexed pool of expenditure is an indexed pool of expenditure for the purposes of section 110;

(b)that no increase or reduction is to be made except for an operative event on or after 6th April 1998; and

(c)that paragraph (a) of section 110(8) and section 114 are to be disregarded.

(5)For the purposes of making any adjustment in accordance with subsection (3)(b) above, subsection (9) of section 110 shall be assumed to provide only that, where the operative event is a disposal, the calculation of the indexation allowance under subsection (2) of that section, as applied by subsection (2) above, is to be made before the reduction under subsection (8)(c) of that section.”

(3)In each of sections 53(4) and 104(3) and (5) of that Act (which refer to section 110), after “110” there shall be inserted “, 110A”.

(4)Subject to subsection (5) below, the preceding provisions of this section have effect in relation to disposals on or after 6th April 1998.

(5)This section does not affect the computation of the amount of so much of any gain as—

(a)is treated for the purposes of the taxation of chargeable gains as having accrued on a disposal on or after 6th April 1998; but

(b)is taken for those purposes to be equal to the whole or any part of a gain that—

(i)would (but for any enactment relating to the taxation of chargeable gains) have accrued on an actual disposal made before that date, or

(ii)would have accrued on a disposal assumed under any such enactment to have been made before that date.