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HMRC internal manual

Corporate Finance Manual

Foreign exchange: matching: bringing amounts back into account: regulation 12 example

Example of reorganisation of share capital following a no gain/no loss disposal

This guidance applies only to reorganisations of share capital before 6 April 2010

Where a reorganisation to which TCGA92/S127 applies occurs in circumstances where

  • there has previously been a no gain/no loss disposal so that no chargeable gain has been brought into account, but
  • the first relevant disposal (upon which it would be brought into account) has not taken place,

the amount that has been held over to be brought in on the first relevant disposal under Reg 8 SI2002/1970 is treated as follows:

  • if it is an exchange gain, it is treated as increasing the consideration on a subsequent disposal
  • if it is an exchange loss, it is deducted from the consideration received. If the exchange loss exceeds the consideration an allowable loss is treated as accruing (under the CG rules).


The facts are as in CFM62430 except that on 1 June 2004 Eckusan plc transfers the shares in Eckusan (IP Holdings) SA to another group company, Eckusan (UK) Ltd. An exchange loss of £550,000 arises up to 1 June 2004 on the currency contracts with which Eckusan plc has hedged the shareholding.

The transfer is treated under TCGA92/S171 as giving rise to neither gain nor loss. Under Reg 8, the loss of £550,000 is deferred until there is a disposal of the shares which is not a no gain/no loss transfer.

Eckusan (UK) Ltd does not hedge its investment in the Swiss company. On 1 July 2004, it exchanges the shares in Eckusan (IP Holdings) SA for shares in Eckusan European Holdings Ltd. Regulation 12 ensures that the deferred loss of £550,000 is brought into account when there is a subsequent disposal of the new holding of Eckusan European Holdings Ltd shares. This is achieved by subtracting £550,000 from the disposal consideration.