Q: Can a limited company still claim capital gains indexation allowance post-January 2018?

 

A. As announced by the Autumn Budget 2017 there has been a removal of capital gains indexation allowance for companies from 1 January 2018. However, contrary to belief, limited companies are still able to make a claim for indexation allowance, albeit claimed in a slightly different way.

The change means that when a company makes a capital gain on or after 1 January 2018, the indexation allowance that is applied in order to determine the amount of the chargeable gain will be calculated up to December 2017. Previously indexation allowance would be calculated up to the month in which the disposal of the asset occurred.

You may recall indexation was completely removed for individuals from April 2008 as part of the capital gains tax simplification. The result of which would be the same for companies who have bought assets since 1 January 2018 as zero indexation allowance would be applicable to those assets.

It is therefore theoretically a good time for companies who have held assets for a number of years to bank the relief whilst it is available and of most benefit to them as any inflation on the asset post-January 2018 would not be covered by an indexation allowance.

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