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CG56940 - Business Expansion Scheme: share reorganisation rules

TCGA92/S150 (8D), TCGA92/S150A (8D), ICTA88/S304A & TCGA92/S137

TCGA92/S150(8D) effectively applies the provisions of ICTA88/S304A for Capital Gains Tax purposes.


    • i) on or after 6 April 1998 a company, having issued only subscriber shares, acquires all the shares (and securities) in a BES company in exchange for the proportionate issue of its own shares (and securities) of a corresponding description, see below,
    • ii) before the issue of the new shares (and securities) the Board of Inland Revenue have notified the old or the new company that they are satisfied that the share exchange will take place for bona fide commercial reasons and will not form part of any such scheme or arrangements as to which Section 137(1) TCGA 1992 would apply, see CG52505,

the share exchange is not treated as a disposal of the original shares and the new shares stand in the place of the old shares in all respects and attract the same relief, see example below.


Please note that the only matters considered by the Clearance & Counteraction Team, Anti-Avoidance Group relate to the anti-avoidance provisions of TCGA92/S137. All other matters must be considered by the Inspector dealing with the company in the first instance with reference to Capital Gains Technical Group if the problem relates to exemption relief or Business Tax Division if the problem relates to Income Tax relief.


Corresponding description means that if the new shares (and securities) were shares (and securities) in the old company they would be of the same class and carry the same rights as the original shares (and securities). Shares (and securities) would be of the same class if they would be so treated if dealt with on the Stock Exchange.


S 150(8D) TCGA 1992

S 304A ICTA 1988

An investor holds 10,000 £1 ordinary shares in X Ltd, a BES company. The shares cost £10,000, were issued on I December 1993 and he has received £10,000 BES relief.

On 1 October 1998 Y Ltd, previously having issued only 2 subscriber shares, issues new £1 ordinary shares in exchange for all the shares in X Ltd. The anti-avoidance provisions of Section 137 TCGA 1992 do not apply and the Board have given advance notification that they are satisfied that the exchange will take place for bona fide commercial purposes.

The investor is not treated as disposing of the shares in X Ltd. The issue of shares in Y Ltd to the investor is deemed to have taken place on the same date and for the same price as the shares in X Ltd were issued. (If the investor acquired the shares in X Ltd on a disposal within marriage, his acquisition of the shares in Y Ltd is deemed to be on the same date and for the same price as the shares in X Ltd.)

The BES relief is attributed to the shares in Y Ltd and is deemed to have been claimed on those shares. Any exemption which would have been available on the disposal of the shares in X Ltd will become available on the subsequent disposal of the shares in Y Ltd.