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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
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Share reorganisations: consideration paid: anti-avoidance: SAV

If you have agreed TCGA92/S128 (2) applies you should ask Shares and Assets Valuation (SAV), to negotiate the market value of the holding before and after the reorganisation. In other cases it may be worth asking SAV for an informal opinion see CG59560 before deciding whether to mount a challenge.

EXAMPLE

In 1986 A Ltd subscribes £200,000 for 200,000 £1 ordinary shares in B Ltd. B Ltd runs into financial difficulties and owes £500,000 to fellow group companies. A Ltd subscribes for a further 500,000 £1 ordinary shares in B Ltd. This is treated as a reorganisation and it is agreed it is a bargain made otherwise than at arm’s length. SAV agree that the market value of A Ltd’s holding of shares before the shares issue was £10,000 and after the reorganisation £50,000. Therefore, only £40,000 is added to the £200,000 base cost of the B Ltd shares owned by A Ltd.