CG47045 | Targeted anti-loss buying rule - special rules for pooled securities

Section 184F of the Taxation of Chargeable Gains Act 1992 contains a special rule applying to

• relevant companies with a pre-change asset and

• other companies that have acquired a pre-change asset following a disposal to which section 171(1) TCGA 1992 applied.

It applies to such companies where the pre-change asset consists of a holding of securities to which the share identification rules in sections 104 to 111 TCGA 1992 apply (CG50500+).

Any new securities acquired after the qualifying change in ownership do not form part of the pre-change asset. Where securities are acquired after the qualifying change of ownership they form a single, pooled asset, separate from those forming the pre-change pool.

Disposals of securities from both a pre-change pool and another pool are identified firstly with the asset that is not the pre-change asset. Where the number of securities disposed of exceeds the number comprised in the other pool, the excess is identified with securities from the pre-change pool. Subject to this general order of priority, all other rules regarding the identification of shares disposed of will continue to apply (CG50500+).

The order of priority explained above cannot be overridden, for example where a sale agreement relates to specifically identified share or bond certificates, provided the relevant securities are all held by the company in the same capacity. This final proviso ensures that a disposal of shares held in a nominee capacity, for example, will only be identified with the total holding as nominee where other shares of the same class are held beneficially.

Section 184F TCGA 1992 takes priority over other identification rules in Chapter 1, Part 4 in cases where sections 184A or B TCGA 1992 are capable of taking effect. If section 184A TCGA 1992 is not in point (say because there were no arrangements for the purpose of securing a tax advantage) then the ordinary share identification rules apply (see CG50500+).

Section 184F(7) TCGA 1992 defines ‘pre-change asset’ and ‘securities’ for the purposes of new section 184F TCGA 1992. ‘Pre-change asset’ has the same meaning as for new sections 184A and 184B TCGA 1992 (see CG47032). ‘Securities’ broadly means any shares or securities of a company, but not relevant securities for the purpose of section 108 TCGA 1992 (qualifying corporate bonds and certain interests in non-qualifying offshore funds).

In common with the ordinary share identification rules in CG50500+, section 184F(8) TCGA 1992 explains that shares or securities of a company are treated as being of the same class where they are, or would be, so treated by the practice of a recognised Stock Exchange.