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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Shares and securities: particular types of transaction

Chapter 9, CG57800+, deals with particular types of transaction.

  • CAPITAL DISTRIBUTIONS. These are distributions which are not charged to Income Tax and are treated as disposals for Capital Gains Tax purposes. You are most likely to see them in a liquidation or a rights issue if the shareholder sells his or her right to take up the shares.
  • DEFERRED CONSIDERATION. The main instructions on deferred consideration are at CG14850+. This section deals with transactions in which an agreement to sell shares or securities includes the right to receive a later payment which may be satisfied by an issue of shares and securities.
  • LOSSES ON THE DISPOSAL OF UNQUOTED SHARES. This section deals with claims by individuals and investment companies that a capital loss on the disposal of shares in an unquoted trading company can be set off against income for Income or Corporation Tax purposes.
  • COMPANY PURCHASE OF OWN SHARES. When a company buys its own shares there is a disposal of those shares by the shareholder. If the purchase is also treated as a distribution the amount charged to Income Tax will be deducted from the disposal proceeds in the Capital Gains Tax computation. Often this results in a capital loss. If the purchase is not treated as a distribution because of ICTA88/S219, see CTM17500 onwards, the full amount of the disposal proceeds are included in the Capital Gains Tax computation. Different rules apply if the shareholder is a UK resident company.
  • STOCK DIVIDENDS. In a stock or scrip dividend a company offers its shareholders the option of having new shares rather than taking a cash dividend. This section explains how you establish the acquisition cost of those new shares for Capital Gains Tax purposes.
  • VALUE-SHIFTING. This section deals with the value-shifting provisions of TCGA92/S29 as they apply to shares. That is arrangements in which a person or persons exercise control over a company to pass value from their shares to shares held by another person. Instructions on Section 29 generally are at CG13204+. There are other value-shifting provisions at TCGA92/S30. These are dealt with at CG13260+.