IFM16260 - Exchanges, Mergers, Schemes of Reconstruction: Collective investment schemes; Anti-Avoidance Rule
Section 103K Taxation of Chargeable Gains Act 1992 (TCGA)
Relief under sections 103G to 103I is not available where arrangements relating to an exchange or reconstruction have a main purposes of securing a tax advantage. Where this rule applies HMRC may counteract any tax advantage by making such adjustments as are just and reasonable. This anti-avoidance rule is closely aligned to that applying to company share exchanges and reconstructions and further detail is provided at Appendix20 of the Capital Gains manual.
This anti-avoidance rule was amended for reorganisations that take place on or after 26 November 2025. The previous version of the rule applied where an exchange or reconstruction was carried out for bona fide commercial reasons and did not form part of a scheme or arrangements with a main purpose of avoiding tax. The effect was to disapply reorganisation treatment for all those holding more than 5% of the units in the scheme, or in the relevant class of units.
Under section 103K where a person is subject to a charge to tax because their disposal of units failed the anti-avoidance rule and they fail to pay the tax due within a certain timeframe, HMRC may in specified circumstances require payment of the unpaid tax from the person who acquired the units.