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Capital Gains tax base cost examples 

1. Shares bought and sold on the ‘same day’:

A BT employee buys 5,000 shares on 1 August 2012 at £0.68 (under BT’s employee saveshare plan) and sells 4,000 shares using the immediate sale facility at £2.15 a share.

The CGT base cost of the shares sold is 4,000 x £0.68 = £2,720

2. Shares sold and shares bought on the same day and within 30 days after the purchase – the ‘Bed and breakfasting’ rule:

In this example a BT employee:

  • Buys 4,000 shares in October 2009 at £1.30 a share
  • Buys 5,000 shares on 1 August 2012 at £0.68 (under BT’s employee saveshare plan)
  • Sells 5,500 shares on 1 August 2012 at £2.15, and
  • Buys 500 shares on 26 August 2012 at £2.20 a share

The CGT base cost of the 5,500 shares sold is:

 

Match

Calculation

CGT base cost

Bought and sold same day (1 August 2012)

5,000 x £0.68

£3,400

Bought within 30 days after sale (26 August 2012)

500 x £2.20

£1,100

Total

5,500

£4,500

3. Example using shares bought at any other time – the ‘Pool’ or ‘Section 104 holding’:

In this example, an individual:

  • buys 4,000 BT shares in October 2009 at £1.30 a share
  • buys 5,000 shares in October 2010 at £1.50 a share
  • buys 5,000 shares on 1 August 2012 at £0.68 (under BT’s employee saveshare plan)
  • sells 10,000 shares on 1 August 2012 at £2.15, and
  • buys 500 shares on 26 August 2012 at £2.20 a share.

The CGT base cost for the 10,000 shares sold on 1 August is calculated as follows:

 

Step

Transaction date

Transaction

Number of shares

Price per share

Cost

Sale price per share

Match shares

CGT base cost

3

Oct 2009

Bought

4,000

£1.30

£5,200

     

3

Oct 2010

Bought

5,000

£1.50

£7,500

     
 

Pool

 

9,000

*£1.41

£12,700

 

4,500

£6,350

1

1 Aug 2012

Bought

5,000

£0.68

£3,400

 

5,000

£3,400

 

1 Aug 2012

SOLD

10,000

   

£2.15

   

2

26 Aug 2012

Bought

500

£2.20

£1,100

 

500

£1,100

   

Shares left

4,500

   

Total

10,000

£10,850

*The pool price is calculated by aggregating the purchase price and dividing by the total number of shares - £12,700/9,000 = £1.41 (rounded)

Steps in calculating the base costs of the 10,000 shares sold on 1 August 2012

Post 5 April 2008, the basic rules to determine which shares are sold are as follows:

1) Shares bought and sold on the same day. In this example, the shares bought on 1 August 2012.

2) Shares acquired within the 30 days following the sale (on a 'first in, first out' basis). In this example, the shares bought on 26 August.

3) The ‘Pool’ or "Section 104" holding (any other of the same type of shares held in any given company) – pool together the shares bought in October 2009 and 2010 to work out the average base cost.

Steps (1) and (2) above are there to prevent the practice of 'bed and breakfasting', which was a common tax-planning technique employed to take advantage of the capital gains tax annual exempt amount, and is no longer possible.

Following the sale there are still 4,500 shares in the pool (9,000 – 4,500) at a CGT base cost of £1.41 per share (aggregate £6,350). These may be taken into account as a result of any later sales.

(Information last updated January 2014)