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Posted Wed, 26 Jan 2022 16:41:27 GMT by ilnomis
Hi, I'm a bit confused with the section 104 holding rules. I understand that, in the simple terms, it applies to buying and selling of SHARES of the same company. However, I currently buy and sell Exchange Traded Notes (ETNs), these are defined as 'Exchange-traded notes (ETNs) are types of unsecured debt securities that track an underlying index of securities', they are similar to bonds and not like shares. Therefore, would these ETNs fall within the section 104 holdings rules? Thank you
Posted Thu, 27 Jan 2022 11:35:23 GMT by HMRC Admin 20
Hi ilnomis,

Fungible assets are ones which it is not possible to identify individually in a holding of more than one because they are functionally identical.
For example, all ICI ordinary shares and all €100 notes are for practical purposes interchangeable.
If a person sells some of their securities, they cannot identify which securities have been sold.

CG50220 - Definitions: meaning of ‘security’ and ‘securities’

Thank you.
Posted Thu, 27 Jan 2022 12:39:47 GMT by ilnomis
Hi, Thanks for the reply. I can understand the logic behind section 104, i.e. not being able to identify what have been sold, if say you sell only a random portion of the total of shares. However, with all my trades I buy and sell only the same amount of shares that I bought at the same time on a particular date. My trading platform also creates a mini summary/report that clearly states when I bought x amount of shares and when I sold the exact same x amount shares. For example: Trade A: 1st Jan 2020 I bought 100 shares of Tesla for £100 each Trade B: 1st June 2021 I bought 200 shares of Tesla for £200 each I then sell the exact 100 Tesla shares that I bought for £100 on 1st Jan 2020 (i.e. Trade A). The trading platform then clearly shows that: 1st Jan 2020 I bought 100 shares of Tesla for £100 each 5th Sept 2021 I sell 100 shares of Tesla for £150 each It'd also then shows what my net profits are. So in that case I can easily show evidence that it's the exact same shares that I bought and sold. I suppose regardless I'll still have to treat it as a section 104 holding? Thanks
Posted Fri, 28 Jan 2022 13:35:31 GMT by HMRC Admin 20
Hi ilnomis,

All shares of the same class in the same company are identical, this quality is called fungibility.
Because you cannot tell shares of the same class in the same company apart it is necessary to have a set of identification rules to determine which shares have been disposed of.
The share pooling (s104) / identification rules apply even if you can identify the shares in some other way.

CG51550P - Capital Gains Manual: Shares and Securities: Share identification rules: Share identification rules for capital gains tax: contents

Thank you.

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