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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Company reconstructions: shareholder: introduction

TCGA92/S136 applies where shares or debentures are issued to holders of a company’s shares or debentures as part of a scheme of reconstruction. From 1 December 2003 onwards, issues of shares can also be taken to include transfers of shares out of treasury (see CG52521).

TCGA92/SCH5AA sets out the meaning of “scheme of reconstruction”. The Schedule applies to schemes where shares or debentures are issued on or after 17 April 2002. The position for earlier schemes is outlined at CG52730+.

TCGA92/S136 will usually be accompanied by TCGA92/S139. Section 136 applies to the shareholders. Section 139 applies to the company.

The basic idea behind schemes of reconstruction is that where the original shareholders keep an interest in the original business then, subject to conditions, they will not be treated as having disposed of their original shares. This is similar to the single continuous asset concept which underlies share reorganisations, see CG51805+. Some common examples of schemes of reconstruction are given in CG52720+.