Lecture 2 - Shares and Securities Notes., Study notes of Business Taxation and Tax Management

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3/6/25, 3:18 PM about:blank Lecture 2 - Shares and Securities Notes Shares and Securities A disposal of shares or securities causes no CGT problems unless a taxpayer disposes of part shareholding which was built up over a period of time in a number of acquisitions. IF this happens it is impossible to identify the shares that have been disposed of, because shares of the same class are “fungible asset” (an asset that cannot be individually distinguished.). But the calculation of the gain or the loss cannot proceed until the cost of the shares has been established. Therefore TCGA 1992 specifies a set of share identification or share matching rules which are used to match disposals against acquisitions in these circumstances. ‘The Share Matching Rules For CGT purposes, disposals of shares or securities are matched against acquisitions of the same class of shares in the same company in the following order: - Firstly, against any acquisitions made on the same day as the day of disposal - Next, against any acquisitions made during the following 30 days, matching with shares acquired earlier rather than later within the 30-day period. This rule is intended to counter the practise known as “bed and breakfasting”, whereby shares are sold and then almost immediately re-acquired so as to trigger gains or losses for avoidance purposes. - Finally, against shares forming the “section 104 holding”. This consists of a pool of all the shares of that class in that company that were acquired before the date of the disposal and which have not been matched against previous disposals. It is important to note that all the share matching rules which apply when a company makes a disposal of shares are different from those which apply for CGT purposes. ‘The Section 104 Holding A taxpayer’s “section 104 holding” of shares of a certain class in a certain company is a pool containing any shares that were acquired before the date of the current disposal but which have not been matched in previous disposals. If it were not for the provisions of section 104, it would be necessary to maintain detailed records of the date and cost of each individual share acquisition. However, the pooling arrangement eliminates the need for such record, recording only: - The no of shares in the $104 holding, - _ The total allowable expenditure in relation to those shares. The allowable expenditure is normally equal to the cost (or CGT acquisition value) of the shares concerned. But if any of the shares in the s104 holding were acquired before 31 March 1982, their cost is replaced by their market value at that date, Note that share acquisitions which are matched against same day disposals or matched against disposals occurring within the previous 30 days do not enter the s104 holding. 113.