Company indexation allowance (UK corporation tax)
A company may deduct indexation allowance when calculating a qualifying chargeable gain on relevant allowable expenditure. For disposals on or after 1 January 2018, the indexation calculation for expenditure incurred before that date is frozen at December 2017; later expenditure does not earn post-2017 indexation. Indexation cannot create or increase a capital loss. Use the given factor in the TX examination and apply separate rules where required.
Worked example
A company disposes of a qualifying asset in 2025–26. Assume its relevant pre-2018 cost is £50,000, the given indexation factor to December 2017 is 0.200 and the gain before indexation is £18,000. The allowance is £50,000 × 0.200 = £10,000, leaving a chargeable gain of £8,000 before other reliefs.
Common mistake
Indexing up to the 2025–26 disposal date or using indexation to turn a gain into a capital loss.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | TX (UK) | Direct | June 2026–June 2027 |