Finance Act 1998

122 Freezing of indexation allowance for CGT

(1) In section 53 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (indexation allowance), after subsection (1) there shall be inserted the following subsection—

“(1A) Indexation allowance in respect of changes shown by the retail prices indices for months after April 1998 shall be allowed only for the purposes of corporation tax.”

(2) In subsection (1) of section 54 of that Act (calculation of indexation allowance), in the definition of “RD”, for “the month in which the disposal occurs” there shall be substituted “the relevant month”.

(3) After that subsection there shall be inserted the following subsection—

“(1A) In subsection (1) above—

(a) the references to an item of relevant allowable expenditure shall not, except for the purposes of corporation tax, include any item of expenditure incurred on or after 1st April 1998; and

(b) the reference to the relevant month is a reference—

(i) where that subsection has effect for the purposes of capital gains tax, to April 1998; and

(ii) where that subsection has effect for the purposes of corporation tax, to the month in which the disposal occurs.”

(4) In section 13 of that Act (attribution of gains to non-resident companies), the following subsection shall be inserted after subsection (11)—

“(11A) For the purposes of this section the amount of the gain or loss accruing at any time to a company that is not resident in the United Kingdom shall be computed (where it is not the case) as if that company were within the charge to corporation tax on capital gains.”

(5) In section 145 of that Act (call options: indexation allowance), in subsection (1), after the word “applies”, in the first place where it occurs, there shall be inserted “(subject to subsection (1A) below)”; and after that subsection there shall be inserted the following subsection—

“(1A) In a case where the whole of the expenditure comprised in the option consideration was incurred on or after 1st April 1998, this section applies for the purposes of corporation tax only.”

(6) Subject to subsection (7) below, the preceding provisions of this section have effect in relation to disposals on or after 6th April 1998.

(7) 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.