Taxes Consolidation Act 1997 section 651

Restriction of indexation relief in relation to relevant disposals

Section 651 restricts indexation relief on capital gains tax disposals of development land to the current use value of the land at the date of acquisition, together with a proportionate share of the incidental costs of acquisition.

• On a disposal of development land, indexation under section 556 applies only to the current use value of the land at the date of acquisition, not to its full cost or market value.
• The incidental costs of acquisition are scaled back proportionately, so that only the portion referable to the current use value qualifies for indexation.
• Where the land was held on 6 April 1974, the part of the market value at that date equal to the current use value on that date may be indexed.
• Enhancement expenditure is not eligible for indexation, but the actual unindexed amount may be deducted in computing the chargeable gain provided it is reflected in the state of the asset at disposal.