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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Company reconstructions: intra-group share exchanges

The provisions of TCGA92/S135 can apply to intra-group share exchanges. For example, company B and company C are members of the same group of companies as defined in TCGA92/S170, and are connected persons within TCGA92/S286. Company B acquires from company C a 30 per cent shareholding in company A in exchange for an issue of shares or debentures.

The disposal of the shares by company C to company B is an intra-group transfer. Until the Woolcombers case, see CG45558+, the generally accepted view was that the ordinary no gain/no loss disposal rule in TCGA92/S171(1) did not apply, see CG45557, so that company B would acquire the shares at their market value.

Following the Woolcombers decision, this result was restored by what is now TCGA92/S171(3). This prevents the no gain/no loss disposal rule from applying in relation to any share exchange on or after 15 March 1988 to which TCGA92/S135 applies, see CG45560+.

See CG51805 on the effect of substantial shareholdings legislation on the reconstruction rules.