AITI Chartered Tax Adviser
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How are share transactions treated in relation to CGT?

When shares are sold from a block of shares of the same class acquired at different times, the latest disposal is matched to the earliest possible acquisition. This FIFO (First In First Out) rule is suspended in favour of a LIFO (Last In First Out) rule when considering a disposal of shares that were acquired less than four weeks previously (see “Bed and Breakfast” Transactions, below).

When a company reorganises or reduces its share capital in such a way that the proportion in which the new shareholdings are held mirrors the proportion in which the old holdings were held, you are not treated as having disposed of your original shares. Instead, your new shareholding takes the place of your old holding and you are treated as having acquired it when you acquired the old shares. No gain arises until you dispose of the new holding.

This share-for-share identification rule also applies where:

(a) you exchange shares or securities in one company for shares in another, for bona fide commercial reasons, as part of a takeover of one by the other,

(b) shareholders in one company are issued with shares or securities in another company as part of a reconstruction of a company, or as part of an amalgamation of two or more companies, for bona fide commercial reasons.