CG50501 - Share identification rules: introduction

This chapter deals with the special rules which have been introduced to deal with this problem. Historically the usual approach has been to pool the cost of the shares, but over the years there have been a number of important changes. In particular, pooling was ended for shares acquired on or after 6 April 1998 by individuals and others liable to Capital Gains Tax (but not for companies within the charge to Corporation Tax). That was because pooling was not consistent with the application of taper relief which was introduced at that time.

The Simplification of Capital Gains Tax in 2008 included the withdrawal of taper relief and the abolition of the ‘kink test’ for assets held at 31 March 1982. This made it possible to simplify the share identification rules by extending pooling to all shares, regardless of when they were acquired, and ended the need to keep track of separate holdings acquired at different times.

Because the 2008 changes swept away the need to distinguish between various holdings of shares Part A of this chapter starts by setting out the principal rules that apply to disposals on or after 6 April 2008 for the purposes of Capital Gains Tax. Part A is to be found at appendix 10 for the time being.

The various previous changes to the share identification rules may still have to be considered when dealing with disposals by a company within the charge to Corporation Tax on Chargeable Gains and disposals by a person chargeable to Capital Gains Tax before 6 April 2008 and Part B of this chapter deals with these, beginning with a historical survey intended to serve as a general introduction for those unfamiliar with the subject. This Part also deals with the detailed rules from 1985 for identifying shares, including indexation and rebasing.