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Taxation (UK) · Taxable total profits

Chargeable Gains for Companies in ACCA Taxation (UK)

Updated 11 October 2026 · Fact-checked

A company's chargeable gain is disposal proceeds less cost, less indexation allowance, less enhancement expenditure and disposal costs. Indexation is frozen at December 2017. The net gain is included in the company's total profits and charged to corporation tax at the normal rates. There is no annual exempt amount.

Understand Chargeable Gains for Companies

A company that sells a capital asset, such as land, buildings or shares, may make a chargeable gain. Companies do not pay capital gains tax. The gain is added to the company's profits and charged to corporation tax.

The gain is worked out in a similar way to an individual's gain: proceeds less allowable costs. The key differences are these. A company has no annual exempt amount. A company gets indexation allowance, which relieves the part of the gain caused by inflation. The gain is taxed at corporation tax rates, not the 18% and 24% CGT rates.

Indexation allowance is based on the rise in the Retail Prices Index (RPI) from the month of acquisition (or of later enhancement expenditure) to the month of disposal. It is frozen at December 2017. If you dispose of an asset after that date, you use the RPI for December 2017 as the end point. If the asset was acquired after December 2017, there is no indexation.

Indexation can only reduce a gain to nil. It can never create or increase a loss. So work out the unindexed gain first, then deduct indexation limited to that amount.

The net chargeable gain is included in total profits along with trading profits, property income and so on. Capital losses cannot be set against income. They are set against gains of the same period, then carried forward against future gains.

Key rules to remember

Company chargeable gain layout
Proceeds − disposal costs − cost − enhancement expenditure = unindexed gain; less indexation allowance = chargeable gain
Indexation cannot create or increase a loss.
Indexation factor
(RPI Dec 2017 − RPI at acquisition) ÷ RPI at acquisition
Round to three decimal places. ACCA gives the RPI figures or the factor in the exam.
Indexation allowance
Indexation factor × allowable cost (or enhancement expenditure)
Calculate separately for each item of expenditure, from its own date.
Gain in total profits
Net chargeable gains are added to total profits
Taxed at 19% to 25% depending on profits; see the marginal relief rules (lower limit £50,000, upper limit £250,000).
Capital losses
Set against gains of the same period, then carry forward against later gains
No annual exempt amount for companies and no set-off against income.

How to solve Chargeable Gains for Companies questions

Use this layout for any company disposal question.

  1. 1Identify the asset and check it is a chargeable asset and a chargeable disposal. Remember cars and exempt items are outside charge.
  2. 2Write proceeds (or market value if a gift or connected party), then deduct incidental disposal costs.
  3. 3Deduct the original cost with acquisition costs, and any enhancement expenditure that is still reflected in the asset.
  4. 4Stop and note the unindexed gain. If it is a loss, no indexation applies.
  5. 5Calculate indexation allowance on cost, and on enhancement from its own date, using the factor up to December 2017 at most. Restrict it to the unindexed gain.
  6. 6Deduct any current-period capital losses and then losses brought forward, to give the net chargeable gain.
  7. 7Include the net gain in total profits and apply the corporation tax rate. Check whether marginal relief or associated companies matter.

Quickest way: Unindexed gain first, then cap indexation

When to use it: Use in Section C when the indexation factor is given and time is short.

  1. Calculate proceeds less costs to get the unindexed gain in one line.
  2. Multiply cost by the given factor and compare with the unindexed gain.
  3. Deduct the lower of the two. Only deducting the lower is the whole trick.
  4. Add the result to total profits and move on.

Common mistakes in Chargeable Gains for Companies

  • Applying an annual exempt amount to a company gain

    Students mix up the individual CGT computation with the corporation tax one.

    Fix: Companies have no annual exempt amount. Gains go straight into profits.

  • Using indexation to create or increase a loss

    Indexation is deducted automatically without checking the unindexed result.

    Fix: Calculate the unindexed gain first. If it is nil or a loss, indexation is nil. Otherwise cap indexation at the gain.

  • Indexing beyond December 2017

    Students use the month of disposal for the RPI.

    Fix: Indexation stops in December 2017. For later disposals use December 2017 as the end date.

  • Taxing the gain at CGT rates of 18% or 24%

    The word 'gain' triggers CGT thinking.

    Fix: A company's gain is part of total profits and is taxed at the corporation tax rate.

  • Setting a capital loss against trading profit

    Students treat losses as one general pool.

    Fix: Capital losses only go against chargeable gains, in the same period and then carried forward.

  • Indexing enhancement expenditure from the original purchase date

    Costs are lumped together for speed.

    Fix: Index each item of expenditure from the month it was incurred.

Worked examples

Example 1

Brook Ltd bought a warehouse in March 2010 for £200,000. It sold it in August 2025 for £320,000, with selling costs of £5,000. The indexation factor from March 2010 to December 2017 is 0.250. Compute the chargeable gain.

Show the solution
  1. Proceeds £320,000 less selling costs £5,000 = £315,000.
  2. Less cost £200,000 = unindexed gain £115,000.
  3. Indexation allowance = £200,000 × 0.250 = £50,000. This is below the unindexed gain so no restriction.
  4. Chargeable gain = £115,000 − £50,000 = £65,000.

Answer: The chargeable gain of £65,000 is included in Brook Ltd's total profits.

Example 2

Tern Ltd sold land in May 2024 for £90,000. It bought the land in June 2016 for £85,000. The indexation factor from June 2016 to December 2017 is 0.080. Tern Ltd has a capital loss brought forward of £1,500. Compute the net chargeable gain.

Show the solution
  1. Proceeds £90,000 less cost £85,000 = unindexed gain £5,000.
  2. Indexation = £85,000 × 0.080 = £6,800.
  3. This exceeds the unindexed gain, so indexation is restricted to £5,000.
  4. Gain after indexation = £5,000 − £5,000 = nil.
  5. No gain remains, so the loss brought forward of £1,500 is not used and is carried forward.

Answer: The chargeable gain is nil and the £1,500 loss is carried forward.

Exam tips

  • Check the date of acquisition. Assets bought after December 2017 get no indexation.
  • The exam usually gives the indexation factor or RPI figures. Show the calculation and the three decimal places.
  • Show the unindexed gain as a separate line so you earn marks even if indexation is wrong.
  • Remember carried-forward losses are used only to the extent needed, with no annual exempt amount to preserve.
  • In Section C, end by adding the gain to total profits and mention the corporation tax effect.

Practice questions from Taxable total profits

Chargeable Gains for Companies 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: frequently asked questions

Do companies pay capital gains tax?

No. A company's chargeable gains are included in its total profits and charged to corporation tax. The CGT rates of 18% and 24% do not apply to companies.

Why is indexation allowance frozen at December 2017?

The legislation stopped indexation from accruing after that date. For a disposal after December 2017 you calculate indexation only up to that month.

Do companies get an annual exempt amount?

No. The annual exempt amount is only for individuals and others within CGT. A company deducts only allowable costs and indexation.

Can a company's capital loss reduce its trading profit?

No. Capital losses can only be set against chargeable gains of the same accounting period, then carried forward to set against future gains.