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HMRC internal manual

Venture Capital Schemes Manual

VCT: investor CG deferral relief: share exchanges: company reconstruction

TCGA92/S151B (5)

A share exchange or a scheme of company reconstruction is treated as a share reorganisation under the general rules described at CG52579 onwards. Section 151B(5) disapplies the share reorganisation rules in such circumstances if:

  • the taxpayer has a holding of shares within (a) or (b) of VCM53300, and
  • the new assets are not ordinary shares in a VCT.

In practice you are most likely to see the operation of this rule when a company which is not a VCT takes over a company which is. The effect of disapplying the share reorganisation rules is that the share exchange is treated as a disposal. Because the shares within (a) and (b) of VCM53300 are exempt from CGT there will be no chargeable gain or allowable loss in respect of the shares themselves. Treating the transaction as a disposal will bring back into charge any deferred gain on shares falling within VCM53300 (a). See VCM53120 for the treatment of share exchanges involving original shares within VCM53300 (c) if the newly issued shares are not shares in a VCT.