Finance Act 1976

4 (1) This paragraph has effect where the transferred property consists of shares in relation to which there occurs before the relevant date a transaction to which paragraph 4 of Schedule 7 to the [1965 c. 25.] Finance Act 1965 applies or would apply but for section 53 of this Act, that is to say—

(a) a reorganisation, within the meaning of that paragraph, or reduction of the share capital of a company; or

(b) the conversion of securities within the meaning of paragraph 5 of that Schedule ; or

(c) the issue by a company of shares in exchange for shares in another company in such circumstances that paragraph 6 of that Schedule applies ; or

(d) the issue by a company of shares under such an arrangement as is referred to in paragraph 7 of that Schedule ;

or any transaction relating to a unit trust scheme which corresponds to any of the transactions referred to in paragraphs (a) to (d) above and to which paragraph 4 of that Schedule applies by virtue of section 45(8) of the Finance Act 1965.

(2) In the following provisions of this paragraph "the original shares " and " the new holding " shall be construed in accordance with the said paragraph 4.

(3) Where this paragraph has effect the original shares and the new holding shall be treated as the same property for the purposes of the principal section and this Schedule.

(4) Where this paragraph has effect and, as part of or in connection with the transaction concerned, the transferee or his spouse becomes liable to give any consideration for the new holding or any part of it, then for the purposes of the principal section the market value of the transferred property on the relevant date shall (except where apart from this paragraph it reflects the liability) be taken to be reduced by an amount equal to that consideration.

(5) For the purposes of sub-paragraph (4) above, there shall not be treated as consideration given for the new holding or any part of it—

(a) any surrender, cancellation or other alteration of any of the original shares or of the rights attached thereto, or

(b) any consideration consisting of any application, in paying up the new holding or any part of it, of assets of the company concerned or of any dividend or other distribution declared out of those assets but not made.