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HMRC internal manual

Capital Gains Manual

Share exchange: anti-avoidance: notification of clearance or refusal

Clearance & Counteraction Team, Anti-Avoidance Group sends copies of its letter giving or refusing clearance to the office dealing with the company whose shares are being acquired. If that company is not resident in the UK copies will be sent to the UK company making the acquisition or a UK parent company in the case of group companies. The Clearance Section will send a copy of the clearance application to Large Business Offices for all their cases but will only send a copy of the clearance application itself to other offices if they consider it contains particularly relevant information. In other cases a copy of the clearance application will be provided if you ask for one.

Local Office action

Clearance & Counteraction Team, Anti-Avoidance Group also issues instructions explaining what action to take. Clearly you will have to consider the specific advice given in individual cases but there are a number of general points.

The clearance procedure is only concerned with whether the anti-avoidance provisions of TCGA92/S137 will prevent TCGA92/S135 or TCGA92/S136 from applying. Clearance does not mean that the sections will actually apply. In the case of Section 135 it is still necessary to check whether the technical conditions set out in CG52523 are satisfied. Usually this will be done by the company local office. CG52660+ gives instructions on how to deal with computations prepared on the basis that Section 135 will apply. The technical conditions which apply to Section 136 are more complex. Here the Clearance & Counteraction Team, Anti-Avoidance Group will indicate if there is any doubt whether Section 136 can apply, see CG52763.

The clearance letter will not indicate whether any debentures that are to be issued are qualifying corporate bonds (QCBs). If the debentures are QCBs it is still relevant to apply for clearance, see CG53823. But TCGA92/S135 and TCGA92/S136 will not apply to the exchange or reconstruction. For full guidance see CG53845+.

The clearance only deals with the share exchange or, in the case of TCGA92/S136 the scheme of reconstruction. All other Capital Gains Tax and Corporation Tax aspects of the transaction must be dealt with in the normal way. The transactions may include Capital Gains Tax or Corporation Tax events and avoidance that are not referred to in the clearance letter or the clearance application.

The shareholder local office should make whatever permanent note is required to ensure that a refusal is not overlooked when the relevant accounts or returns are received.