What is the purpose of section 169VF of the Taxation of Chargeable Gains Act 1992?

Section 169VF establishes identification rules for determining which categories of shares within a mixed holding are treated as disposed of when investors' relief is claimed. It ensures the remaining composition of the holding is correctly determined for any future claim, preserving the maximum possible investors' relief entitlement for the shareholder.

What is the ordering priority for share disposals under section 169VF?

Qualifying shares are treated as disposed of first, followed by excluded shares if a shortfall remains. If both categories are insufficient, potentially qualifying shares make up the balance using a last-in, first-out approach, where shares acquired most recently are deemed sold before those acquired earlier, preserving shares closest to meeting the holding period.

How does the last-in, first-out rule apply to potentially qualifying shares under section 169VF?

When potentially qualifying shares must be identified as disposed of, those acquired most recently are treated as sold before those acquired earlier. This preserves shares closest to satisfying the minimum three-year holding period, thereby maximising the investors' relief that may become available on any future disposal from the same holding.

Why is the section 169VF ordering rule considered taxpayer-friendly?

The ordering rule strips out shares that have already received relief (qualifying shares) and shares that can never receive relief (excluded shares) before touching potentially qualifying shares. This taxpayer-friendly approach preserves shares that may qualify for investors' relief in future once their minimum holding period conditions are met.

Taxation of Chargeable Gains Act 1992 section 169VF

Shares treated as disposed of in previous disposal where claim made

Section 169VF sets out the rules for identifying which types of shares within a holding are treated as having been disposed of when investors' relief was claimed on a previous disposal, so that the remaining composition of the holding can be determined for any future claim.

When investors' relief has been claimed on an earlier disposal from a mixed holding, qualifying shares are treated as disposed of first, up to the number of shares actually sold.
If qualifying shares alone do not account for the full number sold, excluded shares are treated as disposed of next, up to the remaining shortfall.
If there is still a shortfall after qualifying and excluded shares, potentially qualifying shares are treated as disposed of to make up the difference, with those acquired later deemed sold before those acquired earlier.
The ordering rule is designed to preserve the maximum possible investors' relief available on any future disposal from the same holding.

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