Include Capital Gains

Include capital gain

If the company has sold an asset for more than it bought it for, there has been a capital gain. As the owner is a company this is taxed under corporation tax. Had the owner been a person (sole trader or partnership) then this would have been taxed under capital gains tax.


The calculation of a corporate capital gain starts as the personal capital gain did ie

sale price minus
purchase price minus
cost of improvement minus
cost of buying and selling.

Please see CGT basics. (to be added)

There is one additional step for corporate capital gain called indexation. This is a reduction in the CGT owed to take into account inflation. In other words, if the profit from an asset sale was increased by inflation, the indexation reduced the liability, to offset this. As indexation reduces the capital gain it is a good thing to take account of. The reduction reflects inflation. The tables to calculate actual indexation are given in:

http://www.hmrc.gov.uk/ct/managing/company-tax-return/returns/chargeable-gain.htm#3

The capital gain is added to the profit figure.