Revenue Note for Guidance

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Revenue Note for Guidance

651 Restriction of indexation relief in relation to relevant disposals

This section provides that, in the case of disposals of development land, indexation relief under section 556 is given only for —

  • that part of the amount of the consideration given by the vendor or on the vendor’s behalf for the acquisition of the land (or of the market value at date of acquisition where, for example, section 547 (disposals and acquisitions treated as made at market value) applies) as is equal to the current use value of the land at the date of acquisition, together with such proportion of the incidental costs of acquisition as are referable to that current use value, or
  • where the land was held by the vendor on 6 April, 1974, that part of the market value of the land on 6 April, 1974 as is equal to the current use value of the land at that date.

The section does not provide for indexation of enhancement expenditure in computing a chargeable gain on the disposal of development land. However, the actual amount of such expenditure (unindexed) is allowable as a deduction in computing the chargeable gain if it is reflected in the state of the asset at the time of disposal (see section 552(1)(b)).

Relevant Date: Finance Act 2021