Taxation of Chargeable Gains Act 1992 section 145

Call options: indexation allowance

Section 145 deals with how the indexation allowance is calculated when a call option has been exercised and the underlying asset is subsequently disposed of.

• When a call option is exercised and the asset acquired through it is later disposed of, the cost of the option and the cost of acquiring the asset are treated as two separate items of expenditure for indexation purposes.
• The option cost is treated as incurred when the option was originally acquired, and the purchase price of the asset is treated as incurred when the sale under the option took place, giving each its own indexation start date.
• This section does not apply where the special corporation tax rules for options under section 114 apply instead.
• Since indexation allowance was frozen for individuals from April 1998 and abolished entirely for them from April 2008, this section is now relevant only to companies within the charge to corporation tax that acquired options after 31 March 1998.