Individuals can acquire the same shares in a company over multiple time periods for different prices. To calculate the gain arising on the sale of shares we need to identify their base cost. To calculate the base cost, 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. The matching rules applies to individuals only and they only apply to shares in the same class in the same company.
There are 3 matching rules:
• If an individual dispose of shares, he is first deemed to have sold any shares acquired on the same day
• Next the shareholder is deemed to have sold any shares he acquired in the following 30 days
• Finally, the disposal will be matched with all other share acquisitions which are pooled together and form one asset for CGT purposes. This is called the section 104 pool.
If there are multiple acquisitions in the section 104 pool, each share in that pool will be treated as having a base cost equal to the average of the shares in the pool as at the date of disposal.