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HMRC internal manual

Capital Gains Manual

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Roll-over relief on transfer of shares to Share Incentive Plan: the way to allow relief

If the replacement asset is acquired for the full amount of the disposal consideration, then the consideration for the replacement asset is reduced by what would otherwise have been the gain on the disposal of the shares.

CG61980 shows how to allow the relief if the full amount of the disposal consideration is used to acquire the replacement asset.

If the replacement asset is acquired for less than the full amount of the disposal consideration, then partial relief may be available leaving some of the capital gain chargeable.

If the amount which is not used is less than the amount of the gain, the gain is reduced in line with the part of the proceeds that have been applied in acquiring replacement assets and the acquisition cost of the replacement asset will be reduced by the same amount.

CG61981 shows how to allow the relief if only part of the disposal consideration is used to acquire the replacement asset.

There is no relief if the amount which is not used is greater than the amount of the original gain.

The relief does not affect the position of the other parties to the transactions.

You apply any other capital gains provisions which affect the consideration for disposal or acquisition before allowing the relief, for example the market value rule if the person disposing of the shares acquires a replacement asset from a connected person.

The amount of the rolled-over gain is the gain reduced by indexation allowance to April 1998 if any. NOTE. If a taxpayer is within the charge to Capital Gains Tax, neither indexation allowance nor taper relief apply to disposals of assets on or after 6 April 2008. Previously indexation allowance had been frozen at April 1998. For indexation allowance see CG17207+ and for taper relief see CG17895+.

The examples at CG61980-81 show how to calculate the relief when there is only one replacement asset. The XYZ shares are regarded as a single holding. If you are dealing with a case where there are a number of replacement assets, you allocate the relief between them on a just and reasonable basis.

The examples are simplified. If you need help with the computations in an actual case, you should refer to the appropriate part of the Capital Gains Manual.