Taxation of Chargeable Gains Act 1992 (c. 12)

Part V U.K. Transfer of business assets[F1 , [F2 business asset disposal relief] and investors' relief]

Textual Amendments

F1 Words in Pt. 5 heading inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 14 para. 1(1)

F2 Words in Act substituted (with effect for the tax year 2020-21 and subsequent tax years) by Finance Act 2020 (c. 14), Sch. 3 paras. 7(2)(a), 8 (with Sch. 3 para. 7(3))

[F3 Chapter 5 U.K. Investors' relief

Textual Amendments

F3 Pt. 5 Ch. 5 inserted (15.9.2016) by Finance Act 2016 (c. 24), Sch. 14 para. 2

Reorganisations U.K.

169VN Reorganisations where no consideration given U.K.

(1) This section applies where—

(a) there is a reorganisation within the meaning of section 126,

(b) immediately before the reorganisation, a qualifying person holds ordinary shares which, in relation to that reorganisation, are original shares within the meaning of section 126,

(c) on the reorganisation that person does not give or become liable to give any consideration for, or for any part of, a new holding, and

(d) at a time after the reorganisation, there is a disposal of all or part of a new holding.

(2) In this section a “new holding” means—

(a) the holding that immediately after the reorganisation is (in relation to the original shares) the new holding within the meaning of section 126, or

(b) where the new holding within the meaning of section 126 consists of two or more actual holdings, any of those actual holdings.

(3) Subsections (4) and (5) apply for the purposes of determining (for any purpose of this Chapter) the status of shares that immediately before the disposal mentioned in subsection (1)(d) are in the new holding mentioned there (“the new holding concerned”).

(4) Where a number of the original shares were—

(a) subscribed for by the qualifying person,

(b) issued on a particular date (“the relevant issue date”), and

(c) held continuously by that person for a particular period ending immediately before the reorganisation (“the period concerned”),

the following assumption is to be made.

(5) That assumption is that an appropriate number of the new shares were—

(a) subscribed for by the qualifying person,

(b) issued on the relevant issue date, and

(c) had by the time immediately after the reorganisation already been held continuously by that person for the period concerned.

(6) In subsections (4) and (5)—

• “the appropriate number” has the meaning given by section 169VO;

• “the original shares” means the shares held by the qualifying person immediately before the reorganisation that were original shares in relation to the reorganisation;

• “the new shares” means the shares that immediately after the reorganisation were in the new holding concerned (including such, if any, of the original shares as remained after the reorganisation and were in that holding).

(7) In this section a reference to the “status” of a share is to whether it is qualifying, potentially qualifying or excluded.

(8) Section 169VE applies to determine, for the purposes of this Chapter, which shares are included in a holding immediately before a reorganisation as it applies for the purposes of determining which shares are included in a holding immediately before a particular disposal.

(9) References in this section to consideration are to be read in accordance with section 128(2).

169VO The appropriate number U.K.

(1) The “appropriate number” for the purposes of section 169VN(5) is the number found by multiplying the number of shares that are in the new holding concerned immediately after the reorganisation by the fraction—

where—

A is the number of the original shares that were—

(a)

subscribed for by the qualifying person,

(b)

issued on the relevant issue date, and

(c)

continuously held by that person for the period concerned, and

B is the total number of the original shares.

(2) In this section—

• “the new holding concerned” has the meaning given by section 169VN(3);

• “the original shares” has the meaning given by section 169VN(6);

• “the relevant issue date” has the meaning given by section 169VN(4);

• “the period concerned” has the meaning given by section 169VN(4).

169VP Reorganisations where consideration given U.K.

(1) This section applies where—

(a) there is a reorganisation within the meaning of section 126,

(b) immediately before the reorganisation, a qualifying person holds ordinary shares which, in relation to that reorganisation, are original shares within the meaning of section 126,

(c) on the reorganisation that person gives or becomes liable to give consideration for shares ( “ shares issued for consideration ”) which—

(i) are issued to that person on the reorganisation, and

(ii) immediately after the reorganisation are in a new holding, and

(d) at a time after the reorganisation, there is a disposal of all or part of that new holding.

(2) In this section a “new holding” means—

(a) the holding that immediately after the reorganisation is (in relation to the original shares) the new holding within the meaning of section 126, or

(b) where the new holding within the meaning of section 126 consists of two or more actual holdings, any of those actual holdings.

(3) In determining, for any purpose of this Chapter, the status of shares that immediately before the disposal mentioned in subsection (1)(d) are in the new holding mentioned there—

(a) the date of issue of the shares issued for consideration is to be taken to be their actual date of issue (rather than the date of issue of any of the original shares), and

(b) in relation to any part of the new holding for which consideration was not given, sections 169VN(3) to (6) and 169VO apply but as if any reference to the new holding concerned were to that part of the new holding.

(4) Section 169VN(3) to (6) and 169VO also apply in relation to any other holding which is a new holding in relation to the reorganisation and as respects which the person did not, on the reorganisation, give or become liable to give any consideration.

(5) In this section a reference to the “status” of a share is to whether it is qualifying, potentially qualifying or excluded.

(6) References in this section to consideration are to be read in accordance with section 128(2).

169VQ Exchange of shares for those in another company U.K.

(1) This section applies where section 135 applies in relation to an issue of shares in a company (“company B”) in exchange for shares in another company (“company A”).

(2) For the purposes of sections 169VN to 169VP—

(a) companies A and B are to be treated as if they were the same company, and

(b) the exchange of shares is to be treated as if it were a reorganisation of that company's share capital.

169VR New shares issued on scheme of reconstruction U.K.

(1) This section applies where—

(a) section 136 applies in relation to an arrangement between a company (“company A”) and the persons holding shares, or any class of shares, in company A, under which another company (“company B”) issues shares to those persons, and

(b) under section 136(2)(a) those persons are treated as exchanging shares in company A for the shares held by them in consequence of the arrangement.

(2) For the purposes of sections 169VN to 169VP—

(a) companies A and B are to be treated as if they were the same company, and

(b) the exchange of shares is to be treated as if it were a reorganisation of that company's share capital.

(3) In the following provisions of this Chapter, any reference to an exchange of shares includes anything that section 136(2)(a) treats as an exchange of shares.

169VS Modification of conditions for being a qualifying share U.K.

(1) This section applies where—

(a) an ordinary share (“the original share”) is subscribed for by a qualifying person (“the investor”);

(b) the conditions in section 169VB(2)(c) and (d) are met in relation to the original share,

(c) the share is involved in an exchange of shares treated under section 169VQ or 169VR as a reorganisation of share capital, and accordingly is included in the original shares within the meaning of section 169VN(6), and

(d) subsequently there is a disposal of all or part of a holding of shares that in relation to that exchange is a new holding within the meaning given by section 169VN(2).

(2) As respects a share which is in that holding immediately before that disposal, the conditions in section 169VB(2)(f) and (g) are to be regarded as met if (and only if)—

(a) in relation to the period beginning with the issue of the original share and ending with the exchange of shares, those conditions were met by the original share, and

(b) in relation to the period beginning with the exchange of shares and ending with the disposal, those conditions were met by a share representing the original share.

(3) Accordingly—

(a) in section 169VB(2)(f) and (g) as they apply to the original share, any reference to the share-holding period is to be read as to the period mentioned in subsection (2)(a) above, and

(b) in section 169VB(2)(f) and (g) as they apply to a share representing the original share, any reference to the share-holding period is to be read as to the period mentioned in subsection (2)(b) above.

(4) In subsection (1)(c) “the share” includes a share that, following a reorganisation or following an exchange of shares in relation to which section 169VQ or 169VR applies, represents the original share, and subsections (2) and (3) apply in such a case with the necessary modifications.

169VT Election to disapply section 127 U.K.

(1) This section applies where—

(a) there is—

(i) a reorganisation (within the meaning of section 126), or

(ii) an exchange of shares which is treated as such a reorganisation by virtue of section 135 or 136, and

(b) the original shares and the new holding would fall to be treated by virtue of section 127 as the same asset.

(2) If an election is made under this section, a claim for investors' relief may be made as if the reorganisation or exchange of shares involved a disposal of the original shares; and if such a claim is made section 127 and sections 169VN to 169VS do not apply.

(3) Any election under this section must be made—

(a) if the reorganisation or exchange of shares would (apart from section 127) involve a disposal by the trustees of a settlement, jointly by—

(i) the trustees, and

(ii) the person who if the disposal were made would be the eligible beneficiary in respect of the disposal, within the meaning given by section 169VH(2) (or, if more than one, all the persons who would be such eligible beneficiaries);

(b) otherwise, by the individual concerned.

(4) Any election under this section must be made on or before the first anniversary of the 31 January following the tax year in which the reorganisation or exchange of shares takes place.

(5) In this section “the original shares” and “the new holding” have the meaning given by section 126.]