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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Group share exchanges: share exchanges with additional consideration

The reversal of the Woolcombers decision in TCGA92/S171 (3) applies to a transaction treated by TCGA92/S127 and TCGA92/S135 as not involving a disposal by the transferor of the target shares. There is a separate issue concerning the case where a person exchanges shares in one company for shares in another, and in addition receives consideration (such as cash) not forming part of the new holding. The rule in TCGA92/S128 (3) is that the shareholder is treated as having made a part-disposal of the original shares, though without prejudice to the original shares and the new holding being treated as the same asset. You may meet the argument that, if there is a share exchange treated as a part-disposal because there is consideration other than the new holding, the condition in TCGA92/S171 (3) is no longer satisfied, so that the share exchange continues to be governed by the decision in Woolcombers. Taxpayer companies are only likely to make this suggestion in a case where there are losses, as part of an argument that it is still possible to duplicate losses in relation to share exchanges on or after 15 March 1988. We do not accept this interpretation. Our view is that TCGA92/S171 (3) applies to any share exchange on or after 15 March 1988, even where the result of consideration other than the new holding is to treat the transferor as having disposed of an interest in the original shares.