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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › Chapter 19 – Example 4
In previous examples of calculating the indexation allowance, it was taken as the indexed cost less the original cost e.g example 3 has indexation allowance of £9,955 – £5,000, however, in the answer to example 4 you have deducted the original cost and the indexed cost from the proceeds to arrive at a chargeable gain of £9,107, should this not be:
Proceeds £15,000
Less allowable cost (£2,500)
Unindexed gain £12,500
Indexation allowance (£3,393 – £2500) (£893)
Chargeable gain £11,607
As it says in the notes and in the lecture and is shown in the answer you can indeed split the calculation into a deduction of the cost and then a separate calculation of the IA on the share pool – the problem in your calculation is that your IA has not been correctly calculated – the indexation factor to December 2017 is 1.357 – I think you have used 0.357