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HMRC internal manual

Capital Gains Manual

Share reorganisations: consideration paid: anti- avoidance

Young, Austen & Young Ltd (YAY) beneficially owned all the shares in Jones Refrigeration Ltd (Jones). It wanted to sell these shares but Jones owed £200,000 to YAY and other group companies which it could not repay. YAY subscribed for a further 200,000 £1 ordinary shares in Jones which Jones used to repay the loans. YAY sold the shares in Jones. As discussed in CG51748 the subscription for the new shares was treated as a share reorganisation. YAY claimed a deduction for the £200,000 it had paid for the shares even though it was agreed the transaction was a bargain made otherwise than at arm’s length.