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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Group share exchanges: exchanges of shares for QCBs

However, in a case where shares are exchanged for newly issued QCBs, the no gain/no loss rule in TCGA92/S171 (1) does not apply for a reason which stands independently of Section 171(3). Consider the situation where company A exchanges shares in company B for QCBs issued by company C, and companies A and C are members of the same group. If TCGA92/S116 applies, the rule in Section 116(10) is that `so far as it relates to the old asset and the new asset, the relevant transaction shall be treated for the purposes of this Act as not involving any disposal of the old asset…’. This is sufficient to disapply the Section 171(1) no gain/no loss rule in relation to C’s acquisition of the shares in B, since Section171(1) requires both an acquisition and a corresponding disposal. The result is that C’s acquisition cost of the shares in B is governed by the general capital gains rules, unaffected by the no gain/no loss rule in Section 171(1).