# Gifts to a spouse and share matching rules

Do share matching rules affect the base cost of a gift to a spouse, just like other disposals?

• ### Transfer of Property - Settlements Trap ?

Do share matching rules affect the base cost of a 'no gain no loss' gift to a spouse, in the same way as for any other disposal?

For example, if a wife gifts 10 shares to her husband, but acquires 5 more shares of the same type (at a higher cost) in the following 30 days, will that increase the base cost (and the deemed proceeds) of the gifted shares?

Assuming it does, I wonder what the capital gains computation for such a 'no gain no loss' gift look like. Are both disposals (B&B, and S104) that constitute the gift considered at 'no gain no loss', or only the gift overall? If the latter, then is it expected that while there is a net zero gain for the gift, the B&B disposal might amount to a loss, and the S104 disposal amount to an equal but opposite gain? It makes a difference as far as the "Gains in the year" / "Losses in the year" boxes on the SA108 are concerned.

### Replies (9)

By penelope pitstop
29th Dec 2021 15:05

On my Excel spreadsheet CGT calculations for husband's disposals I merely showed something like the following:

Shares transferred to wife Mrs X X X on 31.3.14 on a no gain/no loss basis:

BT Group Plc 9.12.91 - 650 shares cost £1,530
Standard Life Plc 10.7.06 - 1969 shares cost £4,200
Etc. etc.

However, for the husband's Taxcalc entries I showed the following:

BT Group Plc 650 shares
9.12.91 cost £1,530
31.3.14 sold £1,530
Gain/loss £0
Connected to purchaser or seller - Yes

Standard Life Plc 1969 shares
10.7.06 cost £4,200
31.3.14 sold £4,200
Gain/loss £0
Connected to purchaser or seller - Yes

Thanks (1)
By The Dullard
29th Dec 2021 18:12

Yes. The 10 shares transferred to the husband are matched first with the 5 shares that the wife has purchased in the 30 days after the transfer. The other 5 come from the pool.

The nil gain/nil loss transfer is calculated by calculating the consideration that produces neither a gain nor a loss, and that is the cost of the 5 new shares plus the appropriate proportion of the pool for the other 5 shares.

It really is that simple.

Thanks (1)
By 1640123970
29th Dec 2021 18:50

Thanks for confirming!

In this case, for the Capital Gains computations, would you then show two disposals with an associated gain/loss? eg. If the consideration for the whole gift is calculated to be £1500 (5 × £200 from new acquisition, and 5 × £100 from pool):

04/01/21 - Disposal of 5 shares from acquisition on 08/01/21
Cost: £1000
Proceeds: £750
Loss: (£250)

04/01/21 - Disposal of 5 shares from Section 104 holding
Cost: £500
Proceeds: £750
Gain: £250

I think this makes sense if the deemed proceeds for the gift is calculated for the gift as a whole (irrespective of the different disposals that constitute the gift per the share matching rules) - but it feels a bit counterintuitive to show any gain or loss associated with a gift, even if they do cancel each other out!

Thanks (0)
By The Dullard
29th Dec 2021 19:56

No. There is one disposal of 10 shares.

Proceeds (10 shares): £1,500
Cost (5 shares purchased 8/1/21) (£1,000)
Cost (5 shares from s 104 pool) (£500)
Gain/loss Nil.

By calculating two separate gains/losses then you get to the ridiculous point where the artificial £250 loss gets carried forward, if the total gains (including the artificial £250 gain) are less than the annual exemption.

If you want to do it [***] about face for your own computational convenience the only way that makes sense is to do it so it doesn't create an artificial gain and an artificial loss on what is actually a single disposal.

Thanks (0)
By 1640123970
30th Dec 2021 10:53

If it was a sale, and not a gift, would "there is one disposal of 10 shares" still hold? My impression had been that share matching rules can have the effect of treating a single sale as multiple disposals (https://community.hmrc.gov.uk/customerforums/cgt/bdb70c49-205c-ec11-a3ee...). Just wondering if gifts are different in this regard.

Regarding the (hypothetical) artificial £250 loss, how would that be carried forward? I thought allowable losses must first be relieved against chargeable gains arising in the same tax year, even if this has the effect of reducing total gains below the annual exemption. ie. The artificial loss would be relieved against the artificial gain.

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By The Dullard
30th Dec 2021 20:41

The HMRC response in the forum is absolute b*llocks posted by somebody who clearly isn't familiar with the legislation and the purpose of pooling and the share matching rules, which is simply to allocate cost to disposals.

I actually can't contain my horror that HMRC are dishing out "advice" in this way. In its favour, it may constitute reasonable excuse/care, subject to complexity of the matter and the consequences (of which there are actually none, in this instance).

CGT is about disposals and acquisitions. It isn't about sales. It isn't about gifts. Both sales and gifts are disposals, with there being a deemed consideration in the case of gifts (and some sales).

Whether you gift 10 shares (to one person in a single transaction) or sell 10 shares (to one person in a single transaction) there is one disposal, with one amount of (possibly deemed) consideration. The pooling and share matching rules are then applied to determine how much cost is deductible from that consideration.

The s 104 pool and other shares are not separate assets (TCGA 1992, s 104(1)). They are constituent parts of the same asset, with separate amounts of cost. The only exception being where shares are both acquired and disposed of on the same day, when s 105 treats such shares as only adding to the asset if more shares are acquired than are disposed.

Otherwise, if all of the shares that make up the single asset are not being disposed of, there is a part disposal of that asset and the matching rules in s 106A and s 105 tells you how to match the shares disposed of (the part disposal) with shares acquired for the purposes of determining the amount of cost deductible from the consideration. What it doesn't do is deem there to have been separate disposals.

You are correct though, that current year losses are deducted from current years gains without reference to the annual exemption; hence there being no practical effect. However, on the single disposal with which you are concerned there is neither a gain nor a loss, because the legislation (TCGA 1992, s 58) expressly says so.

You, with the assistance of some numpty at HMRC, are making something perfectly simple unnecessarily hard.

Capital gains are calculated as disposal proceeds, less costs of disposal, acquisition costs and improvement/retention costs (TCGA 1992, s 38(1)). You have (whether the shares are sold or gifted) one disposal and one gain or loss to compute.

We know what the gain/loss is, because s 58 has told us that we manipulate a deemed consideration so that it's nil in these circumstances. Then we apply the share matching rules to determine what cost is deductible from the amount of consideration being deemed by s 58, and lo and behold it is equal to that cost. That then becomes the other spouse's base cost for when they dispose of the shares.

The gain on the single disposal is nil. There isn't a £250 gain on one bit and a £250 loss on another bit. The cost of 5 shares has left the s 104 pool and the cost of the 5 shares acquired on the 8/1/21 has been fully used up. That's all there is.

Thanks (1)
By 1640123970
02nd Jan 2022 17:56

This HMRC response to another question is also relevant, and I expect will be equally horrifying to you: https://community.hmrc.gov.uk/customerforums/sa/d67e6590-8e94-eb11-89ee-...

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By Tax Dragon
02nd Jan 2022 19:38

HMRC seems to be excelling itself. What s58 says is that the deemed consideration is "of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the one making the disposal".

Neither, nor. It's not difficult.

In your more recent link, HMRC says there's a loss (presumably clogged?) In your earlier link, HMRC says there's both a gain and a loss.

But... neither, nor. It's not difficult.

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