»Ê¹ÚÌåÓýapp

For assets which were not held by the transferor at 31 March 1982, or which cannot be traced back through an unbroken sequence of no gain/no loss transfers to 31 March 1982, indexation which has been included in the transferee’s RAE on a no gain/no loss disposal remains a part of the RAE on any subsequent disposal. It is not, therefore, indexation as such. So no special rules are needed to `protect� amounts of indexation included in RAE on no gain/no loss transfers prior to 30 November 1993. However, special rules ARE needed to prevent indexation added to RAE on no gain/no loss transfers on or after 30 November 1993 from creating, or increasing, losses on a later disposal.

TCGA92/S56 (3)

»Ê¹ÚÌåÓýapp FA94 inserted a new subsection (3) to TCGA92/S56 to deal with these cases. For disposals on or after 30 November 1993, where the computation gives rise to a loss, and the deductions include amounts of indexation incorporated in RAE under TCGA92/S56 (2), on no gain/no loss transfers on or after 30 November 1993 the amount of RAE to be allowed as a deduction is reduced.

Where the above applies, you should compute the indexation allowance which was incorporated in RAE on any no gain/no loss transfers on or after 30 November 1993. »Ê¹ÚÌåÓýapp amount by which the RAE in the computation on the disposal is to be reduced depends whether the loss is greater than this amount

• where the loss is greater than the amount you have computed, reduce the loss by that amount
• where the loss is less than the amount you have computed, reduce the loss to nil.

»Ê¹ÚÌåÓýapp adjustments above cannot turn a loss into a gain. »Ê¹ÚÌåÓýapp amount of indexation included in RAE as a result of no gain/no loss transfers on or after 30 November 1993 remains, to the extent that it is reducing the gain to nil.

»Ê¹ÚÌåÓýapp above points are illustrated in the following examples.