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HMRC internal manual

Capital Gains Manual

Share exchange: TCGA92/S135: incidental costs

Because a share exchange is not treated as a disposal or acquisition there is no statutory provision for allowing any incidental costs of disposal or acquisition. However, ESC D52 allows the vendor to treat costs that would normally be allowable as consideration given for the new shares or debentures.

This expenditure will be added to the allowable base cost and will attract indexation allowance from the date it is incurred.

NOTE. If a taxpayer is within the charge to Capital Gains Tax, neither indexation allowance nor taper relief apply to disposals of assets on or after 6 April 2008. Previously indexation allowance had been frozen at April 1998. Companies and other concerns within the charge to Corporation Tax are not affected by these changes. For indexation allowance see CG17207+ and for taper relief see CG17895+.

Apportionment of costs

If the acquiring company pays consideration other than the issue of shares or debentures you should apportion any allowable costs between the different elements of that consideration. Any apportionment should be on a just and reasonable basis.

Practical considerations

It is likely that a taxpayer will only incur significant costs if they are selling shares in a private company. The cost of accepting a general offer for shares in a quoted company should be minimal.