Taxation of Chargeable Gains Act 1992 Schedule 2 paragraphs 2–3

Restriction of gain or loss by reference to actual cost

Section Schedule 2 paragraphs 2 and 3 deal with the "kink test" — a comparison between the gain or loss calculated using the deemed 6 April 1965 market value and the gain or loss calculated using the original actual cost, to ensure the taxpayer is not disadvantaged by the rebasing assumption.

• Where using the 6 April 1965 market value produces a larger gain or larger loss than using original cost, the computation reverts to actual cost instead
• Where one method produces a gain and the other a loss, the disposal is treated as giving rise to neither a gain nor a loss
• For identifying which shares were held on 6 April 1965, a last in, first out (LIFO) basis applies — shares acquired later are treated as disposed of before those acquired earlier
• Special rules apply to disposals of quoted securities made before 20 March 1968 where some shares were acquired before and some after 6 April 1965