Income Tax Act 2007 section 246

Identification of shares on a disposal

Section 246 sets out the rules for determining which shares are treated as disposed of when an investor sells only some of the shares of a particular class held in a company, for the purposes of the EIS disposal and spousal transfer provisions.

• Shares acquired on an earlier date are always treated as disposed of before shares acquired on a later date (a "first in, first out" rule).
• Where shares were acquired on the same day, they are disposed of in a specific order that preserves shares carrying tax reliefs for as long as possible — shares with no relief go first, then SEIS-only, then deferral-only, then EIS-only, and finally shares carrying both EIS and deferral relief.
• Shares transferred between spouses or civil partners, or acquired on a no-gain/no-loss disposal, are treated as acquired on the date they were originally issued, not the date of transfer.
• Where a share reorganisation has taken place and TCGA 1992 section 127 applies, shares in the new holding are treated as acquired when the original shares were acquired.