Commentary

Section C2.717 Securities in a section 104 holding

Capital gains tax
Capital gains tax | Commentary

Section C2.717 Securities in a section 104 holding

Capital gains tax | Commentary

C2.717 Securities in a section 104 holding

These rules apply for corporation tax purposes for all periods but only apply for capital gains tax purposes for periods before 6 April 1998.

For securities included in a section 104 holding, see C2.703.

They are treated as a single asset, so that where some, but not all, of the securities in the section 104 holding are disposed of, the part disposal rules1 apply to determine the amount of the allowable expenditure of the securities disposed of. In strictness, this involves a valuation of the new holding following the disposal2, but in practice HMRC accept that the apportionment of expenditure may be made in the proportion which the number of securities disposed of bears to the number remaining3.

An 'operative event' is one which increases or reduces the qualifying expenditure in the section 104 holding; this will normally be an acquisition or disposal of securities of the type in question4.

Acquisition cost of matched disposals

A cumulative record has to be maintained for each section 104 holding showing the number of units and acquisition cost of the securities in the holding at any given time. The holding is created on the earlier of:

  1.  

    •     6 April 1985 (for corporation tax, 1 April 1985) for securities acquired after 5 April 1982 which had not been matched with disposals, and

  2.  

    •     the first acquisition of the class of securities concerned after 5 April 1985 (for corporation tax, 31 March 1985).

The acquisition cost of the opening entry in the cumulative

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