Produced by Tolley

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Shares
  • Matching rules
  • Election for alternative treatment
  • Bonus shares
  • Effect on the matching rules
  • Income tax consequences
  • Rights issues
  • Effect on the matching rules
  • Sale of rights nil paid
  • Scrip issues
  • More...


From 6 April 2008, the rules for disposals of shares were greatly simplified. This note does not cover the rules for disposals in 2007/08 and preceding years. For details of those rules, see Simon’s Taxes C2.706.

Special rules are needed for disposals of shares as these are intangible assets that may have been purchased over a long period with different purchase prices. Without the rules set out in the legislation, it would be impossible to match the disposal with the acquisition and thereby calculate the capital gain or loss.

To find the allowable cost (also known as the base cost) for the capital gains tax (CGT) computation, we need to identify which shares the taxpayer has sold.

The share ‘matching rules’ determine the order in which shares are deemed to have been sold.

Matching rules

The matching rules discussed below apply for individuals and trustees only. There are slightly different matching rules for:

  1. disposals of enterprise investment scheme (EIS) shares, seed enterprise investment scheme (SEIS) shares and venture capital trust (VCT) shares, see the Venture capital scheme shares guidance note and Simon’s Taxes E3.871

  2. disposals of qualifying corporate bonds (QCBs) and non-qualifying corporate bonds (non-QCBs), see the Takeovers guidance note

  3. disposals of shares by companies, see the Share matching rules guidance note

On the disposal of shares, the shares are first matched with acquisitions:

  1. 1)

    made on the same day (although see below for the election for alternative treatment), then

  2. 2)

    made in the next 30 days on a first-in first-out basis (to prevent selling the shares and then re-acquiring them so as to crystalise a gain or loss for planning purposes, known as ‘bed and breakfasting’), not including shares acquired when the taxpayer is non-resident or treaty non-resident in the UK, then

  3. 3)

    made on or after 31 March 1982. Shares acquired before 31 March 1982 are deemed to have been acquired on 31 March 1982 for their market value at that date. The rebasing of assets is discussed further in the

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