CG51624 - Share identification rules for corporation tax: section 104 holding: disposals 30/11/93+: example

  • January 2005 the taxpayer buys 10,000 shares in A Ltd for £100,000.
  • January 2013 the taxpayer sells 5,000 of the shares for £60,000. The allowable costs of disposal are £4,000.

Section 104 Holding

- Number of shares Pool of qualifying expenditure Pool of indexed expenditure
January 2005 Purchase 10,000 £100,000 £100,000
Indexation £100,000 x 0.301 - - £30,100
- 10,000 - £130,100
January 2013 Disposal (5,000) (£50,000) (£65,050)
- 5,000 £50,000 £65,050

Capital Gains Tax Computation

- Amount - - Amount
Pool of indexed expenditure £131,300 x 5,000/10,000 £65,050
Pool of qualifying expenditure £100,000 x 5,000/10,000 £50,000
Indexation - - - £15,050
- - £
Disposal proceeds - 60,000
less Cost 50,000 -
Cost of disposal 4,000 54,000
Unindexed gain - 6,000
less Indexation - 6,000
Chargeable Gain - NIL

Only £6,000 of the £15,050 indexation attributable to the disposal has been used in the computation. But the indexed pool of expenditure is reduced by the full amount of the £15,050 (plus cost).