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Special rules are needed for disposals of shares as these are intangible assets that may have been purchased over a long period with different purchase prices. Without the rules set out in the legislation, it would be impossible to match the disposal with the acquisition and thereby calculate the capital gain or loss.

To find the allowable cost (also known as the base cost) for the capital gains tax (CGT) computation, it is necessary to identify which shares the taxpayer has sold.

The share ‘matching rules’ determine the order in which shares are deemed to have been sold.

These matching rules apply to all shares of the same class held in the same company by the same person held in the same capacity. Therefore, ordinary shares held in certain company by an individual personally cannot be matched with a disposal of ordinary shares in the same company held by that individual in their capacity as a trustee of a settlement.