Statement of Practice 14 (1979)
Published 21 December 1979
© Crown copyright 1979
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1. This Statement concerns the application of paragraph 19, Schedule 2 TCGA 1992 (paragraph 14 Schedule 5, CGTA 1979) to unquoted shares and securities held on 6 April 1965. Where there has been a reorganisation of a company’s share capital before 6 April 1965, paragraph 19(1) deems the shares to have been sold and re-acquired at market value on 6 April 1965. Where a reorganisation takes place on or after 6 April 1965, and all or part of the new holding of shares is disposed of without an election for valuation as at 6 April 1965 being made, paragraph 19(2) requires the new shares to be valued as at the date of the reorganisation - time apportionment is applied to the gain or loss up to that date and on a disposal this is brought into account as well as the subsequent gain or loss.
2. For the purposes of paragraphs 19(1) and 19(2), ‘reorganisation of share capital’ includes not only reorganisation of one company’s share capital within Section 126 or Section 132 TCGA 1992 (Section 77 or Section 82 CGTA 1979), but also certain takeovers, reconstructions and amalgamations involving more than one company within Section 135 TCGA 1992 (Section 85 CGTA 1979) or Section 136 TCGA 1992 (Section 86 CGTA 1979).
3. Paragraph 19(3), however, prevents the application of paragraphs 19(1) or 19(2) where the new holding differs only from the original shares in being a different number, whether greater or less, of shares of the same class as the original shares. HM Revenue and Customs (HMRC) practice has been to treat paragraph 19(3) as capable of covering reorganisations involving more than one company; for example, the exchange of shares of a certain class in one company for shares of the same class in another company.
4. The Commissioners for HMRC have reconsidered this practice in the light of the case of IRC v Dr GW Beveridge ((1979) 52 TC 178). In accordance with opinions expressed in the Court of Session paragraph 19(3) is no longer considered to apply where the shares comprised in the new holding are shares in a different company from the old shares.
5. This interpretation will be applied to all cases in which the liability had not been finally determined at the date of the Court of Session’s judgment (19 July 1979).