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HMRC internal manual

Capital Gains Manual

Substantial shareholdings exemption: interaction with other legislation - recovery of postponed charge - section 140(4) TCGA 1992


TCGA92/Sch7AC/Para35 applies where a chargeable gain has been postponed on a transfer of assets to a company that is not resident in the United Kingdom under TCGA/92/S140. A later disposal of shares that should trigger the recovery of the postponed gain could be exempted by the substantial shareholdings exemption regime. If this happens paragraph 35 provides that a chargeable gain arises at the item of the disposal of the shares equivalent to the gain that was postponed.

For disposals made on or after 6 January 2010 TCGA92/S140 was amended by FA2010/S37(1). The effect is that instead of the postponed gain being added to the consideration received on the disposal of the shares it is now deemed to form a chargeable gain which is separate from any gain or loss in respect of the shares themselves. While the substantial shareholding exemption may apply, if the conditions are met, to the gain or loss on the shares it will not be applicable to the separate postponed gain becoming chargeable by virtue of the provisions of section 140.

As a consequence of this amendment FA2010/S37 (2) repeals TCGA92/Sch7AC/Para35 from the same date.