ACCA ATX UK Syllabus A2. Chargeable gains - Share matching rules for individuals - Notes 2 / 3
Share matching rules
The problem
When shares are disposed of, a problem arises in finding their allowable cost, if the shares were acquired over a long period of time.
The solution
To make this simpler, HMRC uses a set of rules to determine the acquisition date and cost of the shares being disposed of.
These rules are called the matching rules.
Disposals of shares are matched with acquisitions in the following order:
Shares acquired on the same day of disposal.
Shares acquired in the next 30 days following the disposal (FIFO).
Shares from the share pool.
This would be much easier to understand if we did an example!
Illustration:
Benazir owns shares in L plc.
She acquired 1,500 shares in the company on 31/05/2022 for £20,000, and 500 shares on 30/06/2023 for £10,000.
On 07/03/2025 Benazir bought a further 200 shares in L plc. for £4,000.
Benazir sold 1,000 shares in L. plc for £25,000 on 28/02/2025.
Calculate Benazir’s capital gain on the disposal of the shares in February 2025.
Solution:
We need to dispose of 1,000 shares.
Let us apply our matching rules to see which shares we are disposing of.
| FIRST MATCH – same day acquisition | SECOND MATCH – 30 days following disposal acquisition | THIRD MATCH – share pool |
|---|---|---|
| None. | 07/03/2025 – 200 shares for £4,000. | 800 shares needed from share pool. |
Share pool:
| Description | Number | Cost |
|---|---|---|
| 31/05/2022 purchase | 1,500 | 20,000 |
| 30/06/2023 purchase | 500 | £10,000 |
| Total | 2,000 shares | £30,000 |
| Disposal from share pool | (800 shares) | (800/2000) * £30,000 = (£12,000) |
| Remaining in share pool | 1,200 shares | £18,000 |
Specially note how the cost of the shares from the share pool is calculated.
(No. of shares to be disposed from pool/Total shares in pool) * Total cost in pool = Average cost that we apply to our disposal
Calculating capital gain:
Disposal proceeds £25,000
Acquisition cost:
07/03/25 (£4,000)
Share pool (£12,000)
Capital gain £9,000
You also might want to try to draw a timeline to ensure that you do not miss any acquisition dates!