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Dear Tutor please advise on Indexation Allowance.
In the below example I have 2 purchases of shares:
1) in 1994
2) in 2006
I’m also given RPIsMy question: can calculate indexed cost of shares bought in 1994 at once using RPIs of 2013 or I have to convert it first to 2006 ?
Thank you
Problematic Ltd sold the following assets during the year ended 31 March 2013:
On 14 June 2012 16,000 £1 ordinary shares in Easy plc were sold for £54,400.
Problematic Ltd had originally purchased 15,000 shares in Easy plc on 26 June
1994 for £12,600. On 28 September 2006 Easy plc made a 1 for 3 rights issue.
Problematic Ltd took up its allocation under the rights issue in full, paying £2·20
for each new share issued. The relevant retail prices indexes (RPIs) are as follows:June 1994 $144·7
September 2006 $200·1
June 2012 $241·8@Kaymakov Just out of interest,. did you download free F6 course notes and watched all F6 lectures on OpenTuition??
Following on from open tuition team comment above you must firstly work through lectures and OT course notes as most questions posed you should be able to answer from these sources.
In respect of this query, however you will find that it is essential for you to re-index the share pool from one operative event (purchase or sale) to another, in your example from 1994 to 2006, add in the 2006 cost and then re-index the revised indexed cost to disposal date in 2012.
The only time you do not re-index the pool is when shares are acquired through a bonus issue as no additional cost is incurred.
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