ACCA Advanced Taxation (ATX) Practice Exam

Until what date is the indexation allowance available for chargeable gains?

1. Dec 2020

2. Dec 2017

3. Jan 2018

4. June 2019

The correct answer is: Dec 2017

The indexation allowance for chargeable gains is designed to adjust the acquisition cost of an asset for inflation, which can help reduce the amount of taxable gain when the asset is sold. The relevant rules for indexation allowance specify that it applies to disposals of assets until December 2017. This guidance is based on legislation that was enacted following tax reforms, which ultimately ceased the availability of indexation for disposals after that date. Following December 2017, any gains arising from disposals would no longer benefit from the indexation allowance, meaning the original cost of the asset will not be inflated for inflationary effects beyond that point. This framework is important for taxpayers and professionals dealing in chargeable assets, as it impacts the calculation of capital gains tax liability on asset disposals. Options suggesting dates beyond December 2017 do not align with the established rules regarding the availability of the indexation allowance, making them incorrect in the context of this question.