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Inflationary concerns

05 December 2007 / John Endacott
Issue: 4137 / Categories: Comment & Analysis , Finance Act 2008 , Capital Gains
The announcement of the death of inflation allowance is a matter of concern to all practitioners. JOHN ENDACOTT considers its effect and associated problems

KEY POINTS

  • Tax provisions to negate the effects of inflation.
  • Is indexation allowance still necessary?
  • Comparing liabilities before and after the abolition of indexation allowance.
  • The effect of a revived retirement relief.

My ecomomics A level and accountancy degree studies were both dominated by concerns over inflation.

It was at a time when the money supply was obsessed about and given titles in line with British motorways and the accountancy principles were based around current cost accounting and indexation of financial statements to take account of the time cost of money across the accounting period.

There had been high inflation in the UK for a number of years and much higher inflation in other parts of the world.

This led to a number of issues for tax purposes such as the need for...

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