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HMRC internal manual

Capital Gains Manual

Reorganisations of share capital: capital distributions treated as consideration for disposal

A person may receive a capital distribution in cash or assets, as well as new shares, as part of a reorganisation or reduction of a company’s share capital, see CG57812. Such a receipt is treated as consideration for a disposal of an interest in the original shares and TCGA92/S128(4) provides that, in order to determine the cost allowable in the computation of the gain on that disposal, the cost of the original shares shall be apportioned by reference to TCGA92/S129. This means that you should make the apportionment by reference to market values at the date of disposal. In practice you can make the apportionment by reference to the first day on which market values for the shares or debentures in the new holding are quoted. This applies even if there was only one class of share in the new holding. You should not use this method of computation if the customer objects.