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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Value shifting: reorganisation of share capital


Where a company disposes of a subsidiary in exchange for shares or debentures issued by another company, TCGA92/S127 and TCGA92/S135 (3) may treat the disposal as a reorganisation of share capital. In this case there is no disposal of the original shares for capital gains purposes. If a parent company depreciates shares in a subsidiary, and then exchanges the depreciated shares for shares or debentures in a company in a different group, it could, in the absence of special rules, avoid a value shifting charge because there is no disposal within TCGA92/S30, TCGA92/S34 prevents this result by providing that

  • if there is an exchange of shares or debentures which does not give rise to a disposal for capital gains purposes, and
  • if the exchange had been treated as a capital gains disposal Section 30 would have increased the consideration for the disposal

the amount of that increase gives rise to a part-disposal of the original holding under TCGA92/S128 (3).

Finance Act 2011 introduced a new Targeted Anti-Avoidance Rule for disposals of shares and securities by companies on or after 19 July 2011. See CG48500+.