CG57863 - Capital distributions: rights issue: part-disposal of rights

It is not uncommon for taxpayers to take up part of their entitlement to a rights issue and sell the balance of the rights nil paid. They may well sell the rights nil paid to help finance the acquisition of the new shares. The value of the property not disposed of in the part-disposal formula, B in TCGA92/S42, depends upon when the taxpayer accepts the allotment of the shares they propose to take up.

Where the sale of rights is before allotment accepted, then B is the market value of the rights they will retain and the market value of the original shareholding.

 

Where the sale of rights is after allotment accepted, then B is the market value of the new shares and B is the market value of the new shares and the market value of the original holding.

A taxpayer may sell some rights nil paid after they have accepted some of the new shares and before they have decided to accept the rest of the rights issue. In this case the value of B is the market value of the

• new shares already accepted
• original shareholding
• rights still retained.