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HMRC internal manual

Capital Gains Manual

Capital contributions to companies: made under terms of share issue

A shareholder may make a capital contribution to a company at the same time as theshareholder acquires shares in the company. If the capital contribution is made as part ofthe terms of issue of the shares, then the capital contribution should be accepted asconsideration given wholly and exclusively for the acquisition of the shares withinTCGA92/S38 (1)(a). If a capital contribution is made as part of the terms of a share issuewhich is treated as a reorganisation for capital gains purposes, then the capitalcontribution should be accepted as consideration given for the new holding for thepurposes of TCGA92/S128 (1). The amount of the capital gains deduction will remain subjectto the other general rules, such as TCGA92/S17 and TCGA92/S128 (2), see CG14530+ andCG51840+-