SolvedCG51624 | Share identification rules for corporation tax: section 104 holding: disposals 30/11/93+: example
From HM Revenue & Customs · Capital Gains Manual
January 2005 the taxpayer buys 10,000 shares in A Ltd for £100,000.
January 2013 the taxpayer sells 5,000 of the shares for £60,000. The allowable costs of disposal are £4,000.
Section 104 Holding
| - | Number of shares | Pool of qualifying expenditure | Pool of indexed expenditure |
|---|---|---|---|
| January 2005 Purchase | 10,000 | £100,000 | £100,000 |
| Indexation £100,000 x 0.301 | - | - | £30,100 |
| - | 10,000 | - | £130,100 |
| January 2013 Disposal | (5,000) | (£50,000) | (£65,050) |
| - | 5,000 | £50,000 | £65,050 |
Capital Gains Tax Computation
| - | Amount | - | - | Amount |
|---|---|---|---|---|
| Pool of indexed expenditure | £131,300 | x | 5,000/10,000 | £65,050 |
| Pool of qualifying expenditure | £100,000 | x | 5,000/10,000 | £50,000 |
| Indexation | - | - | - | £15,050 |
| - | - | £ |
|---|---|---|
| Disposal proceeds | - | 60,000 |
| less Cost | 50,000 | - |
| Cost of disposal | 4,000 | 54,000 |
| Unindexed gain | - | 6,000 |
| less Indexation | - | 6,000 |
| Chargeable Gain | - | NIL |
Only £6,000 of the £15,050 indexation attributable to the disposal has been used in the computation. But the indexed pool of expenditure is reduced by the full amount of the £15,050 (plus cost).