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HMRC internal manual

Capital Gains Manual

Consideration for disposal: market value rule: company reorganisations

TCGA92/S128 (2)

Where, on a reorganisation within TCGA92/S126, there is consideration for the new holding, TCGA92/S128 determines the treatment of that consideration. Where the issue of shares was otherwise than by way of a bargain made at arm’s length TCGA92/S128 (2) operates so that any consideration paid in excess of the increase in market value of the shares (that is the difference between the market value of the new shares immediately after the reorganisation and the market value of the original shares immediately before the reorganisation) is disregarded. The main instructions on TCGA92/S128 (2) are at CG51840-CG51847.

It will be worth considering the application of these rules where the issued shares are disposed of for an amount less than the consideration within a short time of the issue.