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HMRC internal manual

Capital Gains Manual

Value shifting: control of a company

TCGA92/S29 (2)

The value shifting rules apply if a person who controls a company exercises that control so that value passes out of

  • shares in the company owned by that person, or others connected with that person;


  • rights over the company exercisable by that person, or others connected with that person.

If these conditions are satisfied TCGA92/S29 (2) provides that there is a disposal of the shares or rights out of which the value passes. For further advice as to the meaning of control, see CG14620.


  • J Ltd was set up in May 2007 by Mrs Jones and her son. Mrs Jones held 900 £1 ordinary shares, and her son held 100 £1 ordinary shares.
  • In October 2012 Mrs Jones arranged that the company would amend the rights attaching to its share capital. The shares which she held were reduced to the status of preference shares carrying a 5 per cent dividend. The shares held by her son became `A’ ordinary £1 shares, with all other rights of voting, profits, and on liquidation. This reduced the value of Mrs Jones’ £1 ordinary shares and passed value into the `A’ ordinary £1 shares held by her son.

Shares and Assets Valuation agree that the value of Mrs Jones’ holding immediately prior to the amendments was £9,000. Following the amendments, her shares were worth no more than par, £900. The value passing into the son’s shares is £9,000 - £900 = £8,100.

The value shifting rules treat Mrs Jones as having disposed of her shares. This will be a part disposal; the proportion of the cost attributable to the part disposed of will be

     £8,100                 = 90%

£8,100 + £900

You compute Mrs Jones’ chargeable gains as follows.


  No of
shares Pool of qualifying expenditure      
  2005 900 900  
  part disposal - 810  
    900 90  
  Pool of qualifying expenditure £900 x 90% = £810
      Disposal proceeds 8,100
  less Cost   810
      Chargeable gain 7,290

You treat Mrs Jones’ son as though he incurred relevant allowable expenditure on his shares of £8,100 in October 2012. This is added to the original cost of his shares, £100.