indexation allowance
For corporation tax purposes, a company which disposes of (or is deemed to dispose of) an asset acquired on or after 31 March 1982 receives an indexation allowance which is deductible from any chargeable gain (chargeable gains). The allowance is calculated by multiplying the base cost by the change in the retail price index from the date when such expenditure was incurred to the date of disposal (or deemed disposal).
For capital gains tax purposes, no indexation allowance is available in respect of expenditure incurred after 31 March 1998. For expenditure incurred on or before that date and falling to be deducted on a disposal (or deemed disposal) after 5 April 1998, the indexation allowance is calculated up to and including April 1998 only.
For further details see the HM Revenue & Customs website

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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