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KembaraXtra – Legal Terms – Indexation Allowance
Indexation allowance adjusts capital gains made by companies to reflect inflation between acquisition and disposal of an asset. This prevents companies from being taxed on purely inflationary gains rather than real economic profit.
The allowance is calculated by reference to changes in the retail prices index. While companies benefit from this adjustment, individuals do not receive indexation and are instead subject to capital gains tax at fixed rates.
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