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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Entrepreneurs' Relief: share exchanges etc involving QCBs: exchanges on or after 23 June 2010


As replaced by F(No.2)A2010/Sch1/Para8 and applying in relation to relevant transactions occurring on or after 23 June 2010. See CG64160 for exchanges that took place before that date.

This version of section 169R applies where there is an exchange of shares or securities for qualifying corporate bonds (QCBs) on or after 23 June 2010 and TCGA92/S116 (10) (a) would require a calculation of the chargeable gain that would have arisen if the shares or securities comprising the ‘old asset’ had been disposed of for their market value at the time of the ‘relevant transaction’, that is to say at the time of the exchange. Section 116(10) states that for the purposes of TCGA 1992 there is deemed to be no disposal of the old asset and so, without any further provisions, Entrepreneurs’ Relief would not be available at the time of the exchange and possibly not when the new asset is disposed of either.

To obtain Entrepreneurs’ Relief on a disposal of the shares (the “old asset”) at the time of the exchange, the individual may make an election for the gain not to be deferred by TCGA92/S116 (10). The effect of an election is that the gain is brought into charge at the time of the exchange so that Entrepreneurs’ Relief can be claimed in order to benefit from the 10% rate - TCGA92/S169R (2).

In the absence of an election the gain is deferred and will be charged to CGT when it accrues under TCGA92/S116 (10) (b). It would be unusual for the qualifying conditions for Entrepreneurs’ Relief to be met at the later date when the gain comes into charge.

TCGA92/S169R (3) requires that for an election to be made under this section on a disposal of trust business assets any election must be made jointly by the trustees and the qualifying beneficiary concerned. In other cases the election is made by the individual.

It is NOT possible to make a partial election in respect of only some of the shares (or securities) which constitute the ‘old asset” and are included in the relevant transaction.

Time limit for claims

An election under this section, like the claim for Entrepreneurs’ Relief, must be made on or before the first anniversary of the 31 January following the tax year in which the relevant transaction takes place - TCGA92/S169R (4).


For some years G has been a director of GG Ltd, owning 50% of the ordinary shares, which entitle him to exercise 50% of the votes in the company. GG Ltd was acquired by Z plc in March 2011. Instead of paying cash, Z plc issued GG with qualifying corporate bonds (QCBs) in exchange for his shares. G can redeem these for £12 million cash in 2013.

G has never made a claim for Entrepreneurs’ Relief and will not have any continuing involvement with either GG Ltd or Z plc.

G would meet the conditions for claiming Entrepreneurs’ Relief in respect of a disposal of his shares in GG Ltd. However, the rules in TCGA92/S116 (10) apply so there is no immediate charge to CGT in 2011 when the ‘relevant transaction’ takes place. The gain that would have arisen on a disposal of those shares is calculated on the basis of the full market value at the date of the exchange and produces a figure of £7 million. Normally this is only brought into charge when G disposes of his QCBs, TCGA92/S116 (10) (b).

G makes an election under TCGA92/S169R to disapply the effect of TCGA92/S116 (10) and makes a claim to Entrepreneurs’ Relief, He will therefore be treated as disposing of his shares in GG Ltd in March 2011 and the gain of £7 million will arise then. The first £5 million will be charged at the rate of 10%. The excess over G’s lifetime limit will be liable to tax at the usual rates of CGT.