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HMRC internal manual

Venture Capital Schemes Manual

Share Loss Relief: individual and corporate claimants: individual claimants: more complex cases: shares received in exchange for other shares in a take-over: how ITA07/S145 has changed over time

VCM75350 explained the effect of ITA07/S145 in certain cases where a company issues its own shares as consideration for acquiring the shares of another company. Certain conditions must be met for the ‘look through’ treatment allowed by section 145 to apply, but those conditions have changed from time to time. You must determine when the shares in question were issued in order to know which conditions to consider when dealing with a claim.

Shares issued before 6 April 2007

In relation to shares issued before 6 April 2007 the wording of section 145(1)(e) is different. It does not explicitly require TCGA92/S127 to be applied by TCGA92/S135, but instead requires that either the ‘target’ or the issuing company must, before the latter issued the shares, have received clearance from the Commissioners for HMRC under TCGA92/S138 that they are satisfied that the exchange will be effected for genuine commercial reasons and will not form part of any scheme or arrangement which has the avoidance of tax as it main purpose or one of its main purposes.

Also in relation to shares issued before 6 April 2007, section 145 does not disapply the provisions which are now in section 136 concerning the disposal of new shares which are identified with other shares under TCGA92/S127.

Before ITA 2007 came into effect, the provisions now at section 145 were at section 304A ICTA 1988 and the provisions now at section 136 were at ICTA88/S575(2).

Shares issued before 6 April 1998

In relation to shares issued before 6 April 1998 section 145 does not apply. So if you are considering the disposal of shares which were acquired in a share for share exchange before 6 April 1998 you will need to look at section 136 or its predecessor legislation.