Income and Corporation Taxes Act 1988

299 Disposal of shares

(1) Where an individual disposes of any eligible shares before the end of the relevant period, then—

(a) if the disposal is otherwise than by way of a bargain made at arm’s length, he shall not be entitled to any relief in respect of those shares; and

(b) in any other case, the amount of relief to which he is entitled in respect of those shares shall be reduced by the amount or value of the consideration which he receives for them.

(2) Where after 18th March 1986 an option, the exercise of which would bind the grantor to purchase any shares, is granted to an individual during the relevant period, the individual shall not be entitled to any relief in respect of the shares to which the option relates.

(3) Where an individual holds ordinary shares of any class in a company and the relief has been given (and not withdrawn) in respect of some shares of that class but not others, any disposal by him of ordinary shares of that class in the company, and any option of the kind mentioned in subsection (2) above, shall be treated for the purposes of this section as relating—

(a) first, to those (if any) in respect of which relief has been given (and not withdrawn) under Chapter II of Part IV of the [1981 c. 35.] Finance Act 1981 rather than to others; and

(b) then, to those in respect of which relief has been given (and not withdrawn) under this Chapter (or Schedule 5 to the [1983 c. 28.] Finance Act 1983).

(4) Where the relief has been given (and not withdrawn) to an individual in respect of shares of any class in a company which have been issued to him at different times, any disposal by him of shares of that class shall, subject to subsection (3) above, be treated for the purposes of this section as relating to those issued earlier rather than to those issued later.

(5) Where shares in respect of which the relief was given have by virtue of any such allotment as is mentioned in section 77(2)(a) of the 1979 Act (not being an allotment for payment) fallen to be treated under section 78 of that Act as the same asset as a new holding—

(a) a disposal of the whole or part of the new holding shall be treated for the purposes of this section as a disposal of the whole or a corresponding part of those shares; and

(b) the new holding shall be treated for the purposes of subsection (3) above as shares in respect of which the relief has been given.

(6) For the purposes of this section—

(a) shares in a company shall not be treated as being of the same class unless they would be so treated if dealt with on the Stock Exchange; and

(b) references to a disposal of shares include references to the grant of an option (after 18th March 1986) the exercise of which would bind the grantor to sell the shares.