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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Employee shareholder shares: reorganisation of share capital


Section 127 TCGA92, which provides that a reorganisation shall not be treated as involving any disposal of the original shares and for the original shares and the new holding to be treated as the same asset (see CG51700+), does not apply to exempt employee shareholder shares (see CG56715). The new holding thus does not inherit the base cost of the exempt employee shareholder shares, or the exemption.

The disapplication of section 127 TCGA92 in relation to exempt employee shareholder shares extends to that section as otherwise applied by section 135 (exchange of securities for those in another company, see CG52521+) or section 136 (scheme of reconstruction involving issue of securities, see CG52700+.)