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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Reorganisations of share capital: apportionment of cost where ‘relevant securities’ involved

The ordinary share pooling and identification rules do not apply to ‘relevant securities’, as that term is defined at TCGA92/S108. This is because the rules relating to relevant securities require the identification of individual securities and this would not be possible if they had lost their identity in a Section 104 pool. For further guidance on relevant securities see CG51650.

It is possible that a share reorganisation may involve an issue of relevant securities in respect of shares in a Section 104 pool. For example, a company may make a rights issue of debentures within the Accrued Income Scheme. In such cases you will need to establish

  • the date the relevant securities were acquired and 
  • the acquisition cost of the relevant securities unless the Section 104 holding has been replaced by the securities, for example, on a takeover.

You should apportion the pool of qualifying expenditure between the new holding and the relevant securities in the same way that you apportion costs in a share reorganisation involving quoted shares. This means using the formula in TCGA92/S130. The apportionment is made by reference to market value at the date of the reorganisation. The instructions on Section 130 are at CG51965+ and there is an example of a computation at CG51981.