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Taxation (UK) · Chargeable gains for companies

Chargeable Gains for Companies: Basic Computation Explained

Updated 11 October 2026 · Fact-checked

A company's chargeable gain is disposal proceeds less incidental disposal costs, allowable cost, enhancement expenditure and indexation allowance. Indexation is frozen at December 2017 and the factor is given in the question. The net gain is added to profits and charged to corporation tax. A company has no annual exempt amount and no separate CGT rates.

Understand Chargeable Gains for Companies: Basic Computation

When a company sells or gives away a chargeable asset, it may make a chargeable gain. The idea is the same as for an individual: you compare what the asset was sold for with what it cost.

The big difference is the tax. An individual pays capital gains tax at 18% or 24% and gets an annual exempt amount of £3,000. A company gets neither. Its gains are included in its chargeable profits and charged to corporation tax with all its other income.

So the computation has two jobs. First, work out the gain (or loss) on each disposal. Second, add the total chargeable gains for the accounting period to the corporation tax computation, next to trading profits and property income.

The gain is built from three figures: disposal proceeds, allowable cost (usually the purchase price plus incidental costs of acquisition) and enhancement expenditure (capital spending that adds to the asset's value and is still reflected in it at disposal). Incidental costs of disposal, such as legal and agent fees, are deducted from proceeds.

A company also deducts indexation allowance. It is calculated on the cost (and on any enhancement expenditure) from the date the expenditure was incurred to the earlier of the disposal date and December 2017, because indexation was frozen at December 2017. Enhancement spending after December 2017 gets no indexation. Indexation allowance can reduce a gain to nil, but it cannot create a loss or increase a loss.

The tax rates and allowances ACCA provides do not list indexation factors. In the exam, the indexation factor (or the RPI figures to work it out) is given in the question. Use what you are given. Do not invent your own.

Key rules to remember

Chargeable gain
Unindexed gain = Disposal proceeds − Incidental costs of disposal − Allowable cost − Enhancement expenditure
Allowable cost includes incidental costs of acquisition. This is the gain before indexation allowance. If it is negative, it is a capital loss and no indexation is deducted.
Indexation allowance
Indexation allowance = Indexed expenditure × Indexation factor (to 3 decimal places)
The factor runs from the date of the expenditure to the earlier of disposal and December 2017. Chargeable gain = Unindexed gain − Indexation allowance, but the allowance cannot turn a gain into a loss or increase a loss.
Net chargeable gains for the period
Net chargeable gains = Total gains − Current period allowable losses − Losses brought forward
Capital losses of a company are set only against chargeable gains, never against trading profits.
Corporation tax on gains
Gains are added to total profits and taxed at the corporation tax rates
Small profits rate 19%, main rate 25%, with marginal relief between £50,000 and £250,000 of augmented profits, assuming one company with no associates and a 12-month period.
Company vs individual
Company: no annual exempt amount, no 18%/24% CGT rates
The £3,000 annual exempt amount and the CGT rates apply to individuals only.

How to solve Chargeable Gains for Companies: Basic Computation questions

Use this layout for any company disposal question. Show each line so you pick up method marks.

  1. 1Identify the asset and check it is a chargeable asset and the disposal is chargeable. Exempt items, such as most cars, give no gain.
  2. 2Write down the disposal proceeds. If the sale is not at arm's length, use market value.
  3. 3Deduct incidental costs of disposal, such as legal fees and agent's commission.
  4. 4Deduct the original cost including incidental costs of acquisition.
  5. 5Deduct enhancement expenditure, only if it still shows in the asset at disposal.
  6. 6If the result is a gain, deduct indexation allowance on the cost and any enhancement incurred before December 2017, using the factor given. Do not let it create or increase a loss.
  7. 7Total the gains and set off allowable losses. Then add the net chargeable gain to taxable total profits in the corporation tax computation.
  8. 8Calculate corporation tax on total profits. Do not apply an annual exempt amount or any CGT rate.

Quickest way: Proceeds minus costs, minus indexation, then straight into profits

When to use it: Use this for Section A and Section B objective questions with a single disposal and clear numbers.

  1. Net proceeds first: sale price less disposal costs.
  2. Subtract cost plus acquisition costs plus enhancement.
  3. If the answer is negative, it is a loss. Stop there. No indexation applies.
  4. If it is a gain, deduct indexation allowance (cost × the factor given). Stop at nil if the allowance is bigger than the gain.
  5. Never touch £3,000 or 18%/24% for a company.
  6. Add the gain to profits, then use 19% or 25%, or marginal relief if profits fall between the limits.

Common mistakes in Chargeable Gains for Companies: Basic Computation

  • Deducting the £3,000 annual exempt amount from a company's gain

    Students mix up the individual CGT rules with company rules.

    Fix: Ask yourself who the taxpayer is. A company has no annual exempt amount.

  • Charging the gain at 18% or 24%

    The CGT rates are fresh in mind from the individual topic.

    Fix: Add the gain to total profits and use corporation tax rates: 19% small profits, 25% main, or marginal relief.

  • Forgetting incidental costs of disposal

    Students take the headline sale price as proceeds.

    Fix: Always scan the question for legal, agent and advertising costs and deduct them.

  • Deducting repairs or revenue spending as enhancement expenditure

    Any spending on the asset looks allowable.

    Fix: Only capital spending that adds value and is still reflected in the asset at sale counts. Repairs do not.

  • Setting a capital loss against trading profit

    Students know trading losses can be used against other income.

    Fix: Capital losses are only set against chargeable gains, current period first and then carried forward.

  • Leaving the gain out of profits when testing the £50,000 and £250,000 limits

    Students forget that gains form part of augmented profits and taxable total profits.

    Fix: Include the net chargeable gain in profits before testing the £50,000 and £250,000 limits.

Worked examples

Example 1

Delta Ltd bought a warehouse in June 2010 for £300,000, with incidental acquisition costs of £5,000. In January 2018 it spent £40,000 on an extension, still part of the building at sale. In 2025 it sold the warehouse for £480,000, paying legal and agent fees of £8,000. Assume the question gives the indexation factor from June 2010 to December 2017 as 0.241 (a figure used here only for illustration; in the exam the factor is always supplied). Calculate the chargeable gain.

Show the solution
  1. Proceeds: £480,000.
  2. Less incidental costs of disposal: £8,000, giving net proceeds of £472,000.
  3. Less cost including acquisition costs: £300,000 + £5,000 = £305,000.
  4. Less enhancement expenditure: £40,000.
  5. Unindexed gain: £472,000 − £305,000 − £40,000 = £127,000.
  6. Indexation allowance on the cost: £305,000 × 0.241 = £73,505. The factor runs only to December 2017, even though the sale was in 2025.
  7. The extension was built after December 2017, so it gets no indexation.
  8. Chargeable gain: £127,000 − £73,505 = £53,495.
  9. No annual exempt amount is deducted.

Answer: The chargeable gain is £53,495. It is added to Delta Ltd's profits and charged to corporation tax.

Example 2

Echo Ltd has a 12-month period with trading profit of £200,000 and a chargeable gain of £60,000 on land. It has no associated companies and no dividend income. Calculate the corporation tax payable.

Show the solution
  1. Taxable total profits: £200,000 + £60,000 = £260,000.
  2. With no dividends, augmented profits are also £260,000.
  3. This is above the upper limit of £250,000, so the main rate of 25% applies with no marginal relief.
  4. Corporation tax: £260,000 × 25% = £65,000.
  5. No £3,000 exempt amount and no 18%/24% rate is used.

Answer: Corporation tax payable is £65,000.

Exam tips

  • Read the first line to confirm the taxpayer is a company. Then drop the annual exempt amount and CGT rates at once.
  • Set out the computation in the order proceeds, costs, enhancement, indexation. Each line earns a mark in a written answer.
  • In objective tests, watch for distractors that include £3,000 or 24% as wrong options.
  • Always include the gain in profits before checking the £50,000 and £250,000 limits. A gain can push the company into marginal relief or the main rate.
  • Deduct indexation allowance for a company, using the factor given. Stop it at the date of December 2017, and never let it create or increase a loss.

Practice questions from Chargeable gains for companies

Chargeable Gains for Companies: Basic Computation in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Chargeable Gains for Companies: Basic Computation: frequently asked questions

How is a company's chargeable gain different from an individual's?

The basic gain calculation is similar. A company, though, pays corporation tax on its gains. It has no annual exempt amount and does not use the 18% and 24% CGT rates.

What counts as enhancement expenditure?

It is capital spending that increases the value of the asset and is still reflected in the asset when it is sold. Routine repairs and maintenance do not qualify.

Are company gains taxed separately from other profits?

No. Net chargeable gains form part of the company's profits for the accounting period. They are taxed together with trading and other income at the corporation tax rates.

Can a company's capital loss reduce trading profit?

No. A capital loss can only be set against chargeable gains of the same period or carried forward against future gains.