In this section:
- Capital Gains Tax on shares: the basics
- Capital Gains Tax reliefs on shares
- Selling or disposing of part of your shareholding
- How to calculate capital gains and losses on shares
Selling or disposing of part of your shareholding
The cost of shares can be difficult to identify when you sell or dispose of some - but not all - of your shares. You might buy the same type of shares, in the same company, at different times. This guide explains how to work out the cost for sales or disposals in 2008-09.
On this page:
- Finding out which shares you're selling
- Working out the cost of your shares
- Share reorganisations, company take-overs and mergers
- If you sold your shares before 5 April 2008
- More useful links
Finding out which shares you're selling
In some cases you might buy shares of the same class, in the same company, but at different times and prices. When you come to sell or dispose of some of these shares, share identification rules are applied that match the shares you sold with the ones you bought. The rules that have to be applied are set out below.
Shares bought and sold on the same day
The first step is to match the shares sold or disposed of with shares you bought on that same day. This is the ‘same day' rule. If you haven't bought and sold shares on the same day, you move on to the next step.
Shares acquired within 30 days after selling
The next step is to match the shares sold with shares acquired in the 30 days after the sale or disposal. This is the ‘bed and breakfasting' rule. If you haven't bought any shares within 30 days of the sale, you then look at shares bought at any other time.
Shares bought at any other time
If the shares were acquired on any other date a different rule applies - all shares acquired before the day the shares were sold, of the same type in the same company, are pooled to create a single asset. This is called a ‘Section 104 Holding’.
If you held shares on 31 March 1982, these are included in the Section 104 Holding at their value on that day, not at their original cost.
Example - a Section 104 holding
You buy 4,000 shares in March 2005 for £5,000.
In September 2006 you buy another 6,000 shares of the same class in the same company for £26,000.
This would give you a Section 104 Holding of 10,000 shares with a cost of £31,000.
Working out the cost of your shares
Once you've identified the shares you're selling or disposing of you can go on to work out their cost.
If you've matched shares with shares bought on the same day, you use the cost of those shares.
If you've matched shares with those bought in the 30 days after the sale, you use the cost of those shares.
If you've matched shares with those bought at any other time (the section 104 holding), how you work out your cost depends on whether all or part of the holding has been sold.
Selling all of your shares in the Section 104 holding
If you sell or dispose of the entire holding, then the cost is the total cost of the holding.
Selling some of your shares in the Section 104 holding
If you only sell or dispose of part of the holding, you use a proportion of the total cost of the holding.
You first work out the proportion of the holding being sold. You then multiply this proportion by the total cost of the holding. This gives you the cost of the shares in the Section 104 holding being sold.
Example
You have a Section 104 holding of 10,000 shares with a cost of £31,000.
You sell 4,000 of the shares in June 2008.
You bought no further shares so all of the shares sold are matched with the Section 104 holding.
As the Section 104 holding is considered a single asset, you're treated as if you are selling part of the Section 104 holding.
You work out the proportion of the holding being sold (4,000/10,000 = 40%).
You multiply this by the total cost of the holding (£31,000 x 40% = £12,400).
The cost of the shares sold is £12,400.
Share reorganisations, company take-overs and mergers
Companies sometimes reorganise their shares - for example as a result of mergers and take-overs. The cost of the resulting shares is subject to special rules. Applying these rules normally only becomes relevant when the shares are sold or disposed of. The rules usually apply:
- when a company has made a bonus issue or rights issue of shares or has reorganised its share capital in some other way
- when a company has taken over another in exchange for issuing shares in itself, when companies have merged or de-merged, or when there has been some other form of company reconstruction
Disposing of part of your shareholding: bonus and rights issues
Disposing of part of your shareholding: company take-overs
If you sold your shares before 5 April 2008
If you sold or disposed of shares before 5 April 2008, then the 'same day' rule and 'bed and breakfasting' rules apply in the same way as for shares sold after 6 April 2008 (see above).
However, there are different rules for working out the cost of shares you acquired before the date of the sale or disposal. You can find out more in Help Sheet 284.
Download Help Sheet 284 (2007-08) Shares and Capital Gains Tax (PDF 74K)
