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HMRC internal manual

Venture Capital Schemes Manual

HM Revenue & Customs
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Share Loss Relief: individual and corporate claimants: individual claimants: more complex cases: disposal of shares forming part of a mixed holding: general case

Where only part of a mixed holding of shares is disposed of and the holding contains no EIS, SEIS, BES or deferral relief shares (see VCM75440), section 148(4) and (5) provide rules for deciding whether qualifying shares have been disposed of and, if necessary, when those qualifying shares were acquired.

The basic rule is that these questions are to be addressed by applying the share identification rules at TCGA92/S105 to S105B and S106A. There is detailed guidance on these rules in the Capital Gains Manual at CG50564+ (section 106A) and CG50820+ (sections 105 and 105A).

The shares disposed of from the mixed holding are identified in the following order:

1. against acquisitions on the same day TCGA92/S105(1)(b) see CG50820 
1. against acquisitions within the 30 days following the disposal, provided the person making the disposal was resident in the United Kingdom at the time of the acquisition if the relevant acquisition was on or after 22 March 2006 TCGA92/S106A(5) and (5A) see CG50566 
1. against shares in a Section 104 holding, but without identifying any particular shares in that holding TCGA92/S106A(6) and (7) see CG50590 onwards
1. finally against acquisitions following the disposal (and not already identified under stage 2. above), taking the earliest acquisition first TCGA92/S105(2)  

You will notice that step 3, which identifies the shares disposed of with shares in a section 104 holding, may be of little assistance because the section 104 holding may itself be a mixed holding. Where step 3 is in point then ITA07/S148 provides supplementary rules: the disposal (and any previous disposal out of the section 104 holding) is treated as being of shares acquired later rather than earlier. So in order correctly to apply the identification rules in section 148 you will need to know all the acquisitions to and disposals from the section 104 holding, and trace the composition of the holding from its creation using the rule in section 148(5).


An individual acquires the following shares of the same class in the same company. She holds them in her own capacity.

20 April 1000 shares qualifying shares
25 April 1000 shares not capable of being qualifying shares
3 June 200 shares not capable of being qualifying shares
5 June 100 shares qualifying shares

On 30 April she sold 500 shares. There were no acquisitions on the same day or within the following 30 days, so these 500 shares are identified with shares in the section 104 holding. Under the supplementary rule at section 148(5) they are identified with 500 of the shares acquired on 25 April. These are not capable of being qualifying shares so Share Loss Relief is not available on any loss accruing on their disposal. Immediately after the disposal the section 104 holding is treated as consisting of 1000 qualifying shares and 500 other shares.

On 4 June she sold 1,200 shares. To determine whether any of those 1,200 shares are qualifying shares, the identification rules at section 148 operate as follows:

Step 1: there were no acquisitions on the same day as the disposal

Step 2: 100 of the shares disposed of are identified with the 100 qualifying shares acquired on 5 June.

Step 3: the balance of 1,100 shares is identified with shares in the section 104 holding on a last in first out basis. 200 of them are identified with the shares acquired on 3 June. Of the shares acquired on 25 April, 500 were treated as having been sold on 30 April, so the remaining 500 are available for matching with 500 of the shares sold on 4 June. The residue of 400 shares sold on 4 June is identified with 400 of the qualifying shares acquired on 20 April.

In summary, the 1,200 shares disposed of on 4 June included 500 qualifying shares (deemed to be the 100 acquired on 5 June plus 400 acquired on 20 April). We have identified their dates of acquisition and so we also know the deductions which would be allowable in calculating losses in respect of them if they had not formed part of a holding of shares - this information may be needed if ITA07/S147 (Limits on Share Loss Relief - see VCM75410 to VCM75430) is in point. For Share Loss Relief purposes the 600 shares retained in the section 104 holding are identified with the qualifying shares which were acquired on 20 April.