Share Identification Print

A shareholder may have acquired a holding in a particular company over many years, by purchase through the market, by offers for subscription, or by way of rights or bonus issues. Any shares disposed of will be identified with shares acquired in the following order:

  • Shares acquired on the same day.
  • Shares acquired in the 30 days following the relevant disposal. If there is more than one acquisition during the 30 day period the shares are matched with earlier acquisitions rather than acquisitions occurring later in that period.
    Pool of all other shares.

In determining into which of the above periods a particular acquisition falls, bonus and rights issues are deemed to relate back to the original purchase from which they derive, and accordingly, it will be necessary to track the various pools throughout the period of ownership. These identification rules apply only to individuals, trustees, and personal representatives.

Example:

Derek has an investment holding of 39,000 shares in ABC Plc which is made up of 5,000 shares bought in January 1980 for £7,500. On 31 March 1982 they were valued at £5,000; a further 10,000 shares were bought in August 1995 for £20,000; 6,000 shares were acquired in May 2006 by way of a rights issue of 2:5 at a cost of £3 per share; 5,000 shares were bought in May 2012 for £50,000, and a further 13,000 shares received by way of a bonus issue of 1:2 in December 2014. In December 2021 he sells 19,000 shares for £250,000. He has CGT losses brought forward of £77,000, and no other gains in the year. He is a higher rate taxpayer.

The shares sold are all pooled and the pool is calculated as follows:

Date Number Cost, £
Jan 1980  5,000  5,000
 Aug 1995  10,000  20,000
 May 2006  6,000  18,000
 May 2012  5,000  50,000
 Dec 2014  13,000  Nil
 39,000  95,500
  Dec 2021  (19,000)  (46,526)
 Balance Carried Forward  20,000  48,974

The cost of the shares sold is calculated by multiplying the total cost of £95,500 by the fraction A/B, where:

A is the number of shares sold, and

B is the total number of shares held immediately before the sale.

I.e. £95,500 x19,000/39,000 = £46,526

Note:   The value of the shares held on 31 March 1982 is treated as being their cost for CGT purposes even though the March 1982 value is less than the actual cost of the shares in January 1980.

Derek’s CGT liability is calculated as follows:

£
Disposal proceeds 250,000
Less cost 46,526
203,474
Less Annual Exemption 12,300
191,174
Less Losses brought forward 77,000
Chargeable Gains 114,174
CGT payable @ 20% 22,835

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