Taxation of Chargeable Gains Act 1992 section 131

Indexation allowance

Section 131 deals with how the indexation allowance is calculated when a shareholder pays additional consideration as part of a share reorganisation.

• When shares are reorganised, the new holding is normally treated as having been acquired at the same time as the original shares.
• If the shareholder pays or becomes liable to pay additional consideration for the new holding, that payment qualifies as allowable expenditure for indexation purposes.
• The indexation allowance on that additional consideration runs from the date the consideration was actually paid or became due, not from the date the original shares were acquired.
• This ensures the inflation adjustment fairly reflects the actual period for which the additional money was at risk, rather than backdating it to the original acquisition.