CG51875 - Shares and securities: share reorganisations: consideration received
TCGA92/S128 (3)
Because a reorganisation is treated as involving no disposal a special rule is requiredto make sure a shareholder is taxed on any consideration they receive other than the newholding. This is given in TCGA92/S128 (3). The effect of Section 128(3) is that thereceipt of the consideration is treated as a part disposal of the original shares.However, the normal part disposal formula in TCGA92/S42 does not apply. The cost of theoriginal shares must be apportioned in accordance with the rules in TCGA92/S129, seeCG51890+.
Capital distributions
TCGA92/S128(3) refers in particular to the case where the taxpayer received a capitaldistribution in respect of shares. See CG57800+ for instructions on capital distributions.In practice most of the cases you are likely to see will involve capital distributions.For example,
- the sale of rights ` nil paid', see CG57855+
- receipts from the sale by the company on the shareholder's behalf of fractional entitlements in a bonus or rights issue, see CG57855
- the receipt of cash on a takeover if the shareholder also received shares or debentures, see CG52587. In strictness this is a case in which the reorganisation provisions are adapted to apply to a transaction involving two companies.