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HMRC internal manual

Capital Gains Manual

Group share exchanges: Westcott v Woolcombers Ltd

As a separate matter you also have to consider the capital gains cost to C of the shares in B acquired from A. Prior to Woolcombers the view shared by the Revenue and tax practitioners generally was that, if the share reorganisation provisions treated A as not making any disposal of its shares in B, the no gain/no loss rule did not apply on the transfer from A to C of the shares in B. The reasoning was that, if under the share reorganisation provisions company A makes no disposal of its shares in B, the no gain/no loss rule cannot apply because the main condition for no gain/no loss treatment is that one member of a group of companies disposes of an asset to another member of the group. Before Woolcombers it was therefore generally accepted that, on an intra-group share exchange benefiting from no disposal treatment, the interposed company acquired the target shares at their market value at the time of the exchange.