Shares of a different class  rights issue (some preference shares sold)
In January 2006, Joanne bought 1,000 shares in Annex Ltd for €5,000 (€5 per share) in January 2006. Annex Ltd is an unquoted company.
On 14 June 2010, she received a rights issue of one preference share for every two ordinary shares held for €2,000. She gets 500 preference shares at a cost of €2,000 (€4 per share).
Joanne sold 400 preference shares for €6,000 (€15 per share) on 23 November 2018.
Information Joanne needs to know is:
• All the shares are considered to have been acquired in January 2006.
• The original cost of all the 1,000 ordinary shares is €5,000.
• The original enhancement expenditure is €2,000 (the rights issue of 500 preference shares).
• On the date of disposal, 23 November 2018, the value of the ordinary shares was €20 per share. (The total market value of Joanne's ordinary shares was €20,000.)
• On the date of disposal, 23 November 2018, the value of the preference shares was €10 per share. (The total market value of Joanne's preference shares was €5,000.)
To calculate her CGT, Joanne needs to know the cost and enhancement expenditure of the preference shares she sold.
She calculates the cost and enhancement expenditure of all the preference shares:
Cost of all preference shares
Description  Calculation  Value 
Original cost multiplied by market value of preference shares

€5,000 x €5,000

€25,000,000

Divide by total market value of both classes of shares

€20,000 + €5,000

€25,000

Cost of all preference shares

€25,000,000 / €25,000 
€1,000

Enhancement expenditure of all preference shares
Description  Calculation  Value 
Original enhancement expenditure multiplied by total market value of preference shares

€2,000 x €5,000

€10,000,000

Divide by total market value of both classes of shares

€20,000 + €5,000

€25,000

Enhancement expenditure of all preference shares

€10,000,000 / €25,000 
€400

Joanne can then calculate the cost and enhancement expenditure of the 400 preference she has sold:
Cost of preference shares sold
Description  Calculation  Value 
Cost of all preference shares


€1,000

Divide by total number of preference shares

€1,000 / 500

€2

Cost of 400 preference shares

€2 x 400

€800

Enhancement expenditure of preference shares sold
Description  Calculation  Value 
Original cost


€400

Divide by total number of shares

400 / 500

0.8

Enhancement expenditure of 400 preference shares

0.8 x 400

€320

Joanne can now calculate her CGT on the disposal of her preference shares:
Calculation of Joanne's CGT
Description  Calculation  Value 
Sale price


€6,000

Deduct allowable expenses:



Cost of preference shares sold


€800

Enhancement expenditure of preference shares sold


€320

Chargeable gain


€4,880

Deduct personal exemption


€1,270

Taxable gain


€3,610

CGT to be paid (33% of €3,610)

€3,610 x 0.33

€1,191.30

Joanne must pay her CGT by 15 December 2018. She files her CGT return by 31 October 2019.