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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Company reconstructions: capital gains cost of shares acquired

TCGA92/S135 only covers the capital gains position of those who receive shares in (or debentures of) one company, company B, in exchange for their shares in (or debentures of)another company, company A. It does not affect the capital gains position of company B, which acquires the company A shares.

The base cost of the company A shares to company B will follow normal capital gains principles, and will depend on whether the market value in TCGA92/S17(1) applies.

  • Where the market value rule applies, see CG14530+, the acquisition cost of the company A shares to company B will be the value of the holding of company A shares which company B acquires on the exchange.
  • Where the market value rule does not apply, the acquisition cost of the company A shares to company B will be what company B gave for them. Although in these cases the consideration is satisfied by an issue of shares, the contract for sale and purchase of the company A shares will normally specify the agreed consideration as an amount of money. The acquisition cost of the company A shares to company B will be the amount specified in the contract, in accordance with the decision in Stanton v Drayton Commercial Investment Co Ltd, 55TC286, see CG13090.