504 Capital gains tax

Summary

This section sets out the capital gains tax treatment on the disposal of qualifying shares.

Details

(1) In computing a capital gain or loss on the disposal of shares in respect of which relief has been granted no account is taken of the relief granted where sums allowable as a deduction (that is, the cost of acquiring the shares plus indexation relief) do not exceed the consideration arising on the disposal. However, where there is a loss on the disposal the sums allowable as a deduction are reduced by the lower of —

• the amount of the relief granted, and
• the excess of the allowable sums over the consideration.

This reduction will normally result in a no gain/no loss situation. These rules do not, apply to disposals made between a husband and wife/civil partners living together.

(2) Where an individual disposes of part only of his/her shareholding or has an aggregate holding of shares in a single company, some of which have and some which have not qualified for relief, it is necessary to identify the shares disposed of and to determine whether, and to what extent, they relate to shares which have obtained relief which has not been withdrawn. In such cases disposals are to be identified with acquisitions in the following order —

• firstly, shares for which relief has been obtained,
• secondly, other shares.

In the case of shares in respect of which relief was granted, shares acquired earlier are treated as having been disposed of before other shares acquired later.

(3) To enable an individual’s shares on which relief has been given and not wholly withdrawn to be traced through a reorganisation of share capital (for example an allotment of bonus shares or an alteration of class rights affecting both the individual’s relieved and unrelieved shares in the company) the rule in section 584(3) (that the original shares and the new holding are treated as the same asset) applies separately to the relieved set of shares and the unrelieved set. Each set of shares, therefore, is treated as a separate holding of original shares and identified with a separate new holding.

If bonus shares are issued, those attributable to the original shares for which relief has been given will be treated as having obtained relief, while those attributable to the unrelieved shares will not.

(4) There shall be made all such adjustments of capital gains tax, whether by means of assessment or by means of discharge or repayment of tax, as may be required in consequence of the relief being given or withdrawn.

Relevant Date: Finance Act 2019