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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
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Groups: indexation allowance restriction: share reorganisations

The reorganisation might involve the exchange of one class of asset subject to the indexation restriction for another. Suppose a company acquires a debt on a security owed by a linked company, or redeemable preference shares in a linked company, and the companies remain linked. If the company disposes of the debt or the redeemable preference shares no indexation allowance will be due. If instead the company exchanges the debt or the redeemable preference shares for a holding of ordinary shares, and the reorganisation falls within TCGA92/S127, then, in the absence of any contrary provisions, a full indexation allowance would be due on a disposal of the ordinary shares. The indexation allowance would be calculated by reference to the date and cost of acquisition of the debt or the redeemable preference shares. This is because the provisions relating to the acquisition of ordinary shares would not be satisfied in relation to the acquisition of the debt or the redeemable preference shares.