Policy paper

Capital Gains Tax — anti-avoidance for share exchanges and reorganisations

Published 26 November 2025

Who is likely to be affected 

Individuals, trusts and companies involved in the exchange or reorganisation of a company’s share capital. 

General description of the measure 

This measure makes changes to the capital gains avoidance rules that apply to share exchanges and company reconstructions. It amends the existing avoidance rules by ensuring that they apply to those persons who have entered into arrangements where the main purpose, or one of the main purposes, of the arrangement is to secure a tax advantage that they would not ordinarily have been entitled to.

Policy objective 

This measure will increase trust in the tax system by making the anti-avoidance rules that apply to the capital gains share exchange and reconstruction rules more effective. This supports the government’s objective of a fair tax system. 

Background to the measure 

This measure was announced at Budget 2025. 

Detailed proposal 

Operative date 

The measure will have effect in relation to an issue of shares or debentures made on or after 26 November 2025.

Where a clearance application is received by HMRC before 26 November, the current legislation in section 137 Taxation of Chargeable Gains Act (TCGA) 1992 will apply where the shares and debentures are issued either:

• within 60 days of announcement
• if later, within 60 days of the decision under section 138(1) or (where relevant), of that under section138(4) TCGA 1992 

Current law

The capital gains share reorganisation rules, found at sections 127 to 139 in the TCGA 1992, broadly apply where a company’s share capital is reorganised and are extended to where shares are issued to a person in exchange for shares in another company or its share capital is reconstructed. As these are usually ‘paper for paper’ transactions, where no cash has been paid, the reorganisation rules provide that there is no immediate charge to Capital Gains Tax (CGT) or Corporation Tax (CT) on shareholders. Instead, any gain is rolled over into the new shares. This avoids dry tax charges and ensures that tax is not an obstacle to such transactions, which are usually made for good commercial reasons. The reorganisation provisions are subject to avoidance rules found at s137(1) and 139(5) (and 103K(1)) TCGA 1992 and a clearance procedure at s138 TCGA 1992.

Proposed revisions 

Legislation will be introduced in Finance Bill 2025-26 amending the anti-avoidance provisions that apply to reorganisations, so that they now apply to those cases where a person has entered into arrangements where the main purpose, or one of the main purposes, of those arrangements was to secure them a tax advantage. Where this is satisfied, the reorganisation provisions will not apply. This outcome will only apply to those persons who entered into such arrangements, it will not apply to persons who did not benefit from the avoidance put in place.

The focus of the current rule is on the reason for, or purpose of the overall reorganisation. The proposed revisions mean that the rule will now better target those cases where, as part of a commercial exchange or company reconstruction, additional arrangements have been put in place to obtain a tax advantage.

A transitional rule for clearance applications made under section 138 that are received by HMRC before 26 November 2025 will be introduced.

Summary of impacts 

Exchequer impact (£ million) 

2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031
—	+20	+20	+20	+20	+20

These figures are set out in table 4.1 of Budget 2025 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2025. 

Macroeconomic impact 

This measure is not expected to have any significant macroeconomic impacts. 

Impact on individuals, households and families 

The changes being made are primarily technical in nature, individuals will not be required to do anything differently. The main impact will be on those individuals who enter into avoidance schemes involving shares, often involving family companies, as the changes will make such avoidance planning more difficult. 

This measure is expected overall to have no impact on individuals’ experience of dealing with HMRC. 

Equalities impacts 

The changes introduced by this measure will apply regardless of an individual’s protected characteristics. The population impacted is expected to be a small subset of the CGT population. HMRC do not hold any data on the protected characteristics of those making use of these capital gains provisions and therefore cannot make an assessment of the impacts on those with protected characteristics. 

Administrative impact on business including civil society organisations 

The measure will have a negligible administrative impact on those business that enter into avoidance schemes involving share or company reconstructions.

One-off costs could include companies familiarising themselves with the change. There are not expected to be any further one-off or continuing costs.

This measure is expected overall to have no impact on business and civil society experience of dealing with HMRC. 

Operational impact (£ million) (HMRC or other) 

This measure will not require changes to HMRC’s processes or resources.

Other impacts 

Other impacts have been considered and none have been identified. 

Monitoring and evaluation 

The measure will be monitored through information collected from tax returns and HMRC compliance work. 

Further advice 

If you have any questions about this change, contact the CGT policy team by email: cgtbudget@hmrc.gov.uk.