Share identification rules for corporation tax: section 104 holding: creating the holding
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.
- 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|
|A Section 104 holding is created in April 1985||400||£1,825||£1,992|
|£1,825 x||373.9 - 342.6||= £167|
|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|
|The cost of the new shares in December 1986 is added to the two pools of expenditure||500||£3,025||£3,025|
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)
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