Finance (No. 2) Act 1975

58 Disposal of shares and securities within prescribed period of acquisition. U.K.

(1) For the purposes of corporation tax on chargeable gains, shares disposed of by a company shall be indentified in accordance with the following provisions where—

(a) the number of shares of that kind held by the company at any time during the prescribed period before the disposal amounted to not less than 2 per cent. of the number of issued shares of that kind ; and

(b) shares of that kind have been or are acquired by the company within the prescribed period before or after the disposal.

(2) Where a company is a member of a group, shares held or acquired by another member of the group shall be treated for the purposes of paragraphs (a) and (b) of subsection (1) above as held or acquired by that company and for the purposes of paragraph (b) any shares acquired by that company from another company which was a member of the group throughout the prescribed period before and after the disposal shall be disregarded.

(3) References in subsection (1) above to a company’s disposing, holding and acquiring shares are references to its doing so in the same capacity ; and references in that subsection to the holding or acquisition of shares do not include references to the holding or acquisition of shares as trading stock.

(4) the shares disposed of shall be indentified—

(a) with shares acquired as mentioned in subsection (1)(b) above (in this section referred to as “available shares”) rather than other shares ; and

(b) with available shares acquired by the company making the disposal rather than other available shares.

(5) The shares disposed of shall be indentified with available shares acquired before the disposal rather than available shares acquired after the disposal and—

(a) in the case of available shares acquired before the disposal, with those acquired later rather than those acquired earlier ;

(b) in the case of available shares acquired after the disposal, with those acquired earlier rather than those acquired later.

(6) Where available shares could be identified—

(a) with shares disposed of either by the company that acquired them or by another company ; or

(b) with shares disposed of either at an earlier date or at a later date,

they shall in each case be identified with the former rather than the latter ; and the identification of any available shares with shares disposed of by a company on any occasion shall preclude their identification with shares comprised in a later disposal by that company or in a disposal by another company.

(7) Where a company disposes of shares which have been identified with shares disposed of by another company, the shares disposed of by the first-mentioned company shall be identified with the shares that would, apart from this section, have been comprised in the disposal by the other company or, if those shares have themselves been identified with shares disposed of by a third company, with the shares that would, apart from this section, have been comprised in the disposal by the third company and so on.

(8) Where shares disposed of by one company are identified with shares acquired by another, the sums allowable to the company making the disposal under [F1 section 32 of the Capital Gains Tax Act 1979] shall be—

(a) the sums allowable under [F1 subsection (1)(c) of that section] (incidental costs of disposal); and

(b) the sums that would have been allowable under [F1 subsection (1)(a) and (b) of that section] (acquisition cost etc.) to the company that acquired the shares if they had been disposed of by that company.

(9) This section shall have effect subject to [F1 section 66(1) of the Capital Gains Tax Act 1979] (identification of shares acquired and disposed of on same day) ; and [F1 subsection (2) of the said section 66] (identification of shares not identified [F1 under subsection (1)]) shall have effect subject to this section.

(10) In this section—

“group” has the same meaning given in section 272 of the Taxes Act ;

“the prescribed period” means—

(a) in the case of a disposal through a stock exchange or Automated Real-Time Investments Exchange Limited, one month ;

(b) in the case of a disposal otherwise than as aforesaid, six months ;

. . . F2

(11) Shares shall not be treated for the purpose of this section as being of the same kind unless they are treated as being of the same class by the practice of a recognised stock exchange or would be so treated if dealt with on such a stock exchange.

(12) This section applies to securities as defined in [F1 section 82 of the Capital Gains Tax Axt 1979] . . . F3 as it applies to shares.

(13) This section applies where the acquisition and disposal mentioned in subsection (1) above are after 14th April 1975.

Textual Amendments

F1 Words substituted by Capital Gains Tax Act 1979 (c. 14, SIF 63:2), s. 157(2), Sch. 7 para. 9

F2 Definition repealed by Finance Act 1990 (c. 29, SIF 63:1), ss. 41, 132, Sch. 6 para. 10, Sch. 19 Pt. IV, Note 3

F3 Words repealed by Finance Act 1985 (c. 54), s. 98(6), Sch. 27 Pt. VII

Modifications etc. (not altering text)

C1 S. 58: See Finance Act 1982 (c. 39), s. 88(1)(a)