Strictly speaking, the legislation currently says that the only historic date at which a valuation supplants cost where an asset is owned is 6 April 1974, because for the purposes of CGT any asset owned on that date is deemed to have been sold and re-acquired at its market value. After that, a person is supposed to have a full record of all the costs of purchasing, building or enhancing a property that they have owned since that time.
There is absolutely no doubt that the government should look at bringing forward this date by multiple decades in order to simplify record keeping, perhaps even to 1994 or dare I say it, 2004, but if that is done, there would inevitably be winners and losers, and it requires a robust review of the entire CGT system because the government wants to know what it stands to lose. Personally I think they should introduce legislation for an
optional more recent historic date where a valuation can supplant cost in order to simplify the system if the taxpayer has lost records.
In the UK, they still use 31 March 1982 as the historic backstop date (albeit there is a different system for non-res UK property owners that was introduced more recently).
The normal concept within tax law that records need to be retained for only 7 years doesn't apply when it comes to property owned more than 7 years - a full record of capital expenditure needs to be retained.
Obviously when records are lost, a valuation at the historic date of purchase might be useful but as others have said, market value doesn't necessarily correspond to the cost of buying and building.
Incidentally, the OP will appreciate that cost indexation will be allowed for any expenditure prior to 2003. The indexation rate is determined by date (well, tax year). Expenditure is multiplied by 1.193 if incurred in the year to 5 April 2000, or 1.144 during the year ended 5 April 2001.
From the Revenue:
When do you use market value?
You will need to use the market value of the asset to work out your chargeable gain if:
- it was a gift to someone other than your spouse or civil partner
- you sold it for less than it was worth to help the buyer
- you inherited it and are now disposing of it
- you bought it before 06 April 1974.