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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Share identification rules for corporation tax: section 104 holding: creating the holding

Creation

A Section 104 holding will come into existence either on

  • 1 April 1985 if the company still held shares which they had acquired after 31 March 1982, or
  • on the first occasion after 1 April 1985 that the company acquired shares of the same class in the same company.

Where the Section 104 holding was created on 1 April 1985 the pool of indexed expenditure was created by giving indexation allowance up to 6 April 1985.

EXAMPLE

  • January 1984 a company bought 400 shares in A Ltd costing £4.50 per share, dealing costs £25
  • December 1986 the company bought a further 500 shares cost £6 per share, dealing costs £25.

SECTION 104 HOLDING

      Number of shares Pool of qualifying expenditure Indexed pool of expenditure
           
STEP 1          
A Section 104 holding is created in April 1985     400 £1,825 £1,992
£1,825 x 373.9 - 342.6 = £167      
  342.6        
STEP 2          
The purchase of 500 shares in December 1986 is the next operative event. Indexation is given up to December 1986.         £102
£1,992 x 393.0 - 373.9 =£102      
  373.9   400 £1,825 £2,094
STEP 3          
The cost of the new shares in December 1986 is added to the two pools of expenditure     500 £3,025 £3,025
      900 £4,850 £5,119

The RPI was rebased in January 1987. Companies could either use figures which take the 1987 base RPI back to 1982 or use the

RPI for Jan 87 (old basis) x             RE (new basis)                   -              100

                              RL (old basis)                                                                                               

                                                            100

For example, if there was an operative event in April 1987 and the previous operative event was in December 1986 the indexation formula would be

394.5     x             101.8                    -              100        =             0.0219

               393.0                                                                

 

                                             100