Where a company makes a disposal identified with share held at 6 April 1965 and has not made an election under TCGA92/S35(5) the ‘kink test’ is applied to determine the allowable cost.

How the kink test applies depends on whether the shares were quoted on a recognised stock exchange back in April 1965.

Quoted shares

Where the shares were quoted on a recognised stock exchange on 6 April 1965 or had been so quoted in any of the previous six years, TCGA92/SCH2/PARA1 provides that -

The company is treated as though it had sold and immediately reacquired the shares at their market value on 6 April 1965, TCGA92/SCH2/PARA1 (2).

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