Finance Act 2012

Assets held for purposes of long-term business

27 (1) This paragraph applies if—

(a) immediately before 1 January 2013 securities are treated, as a result of section 440A of ICTA (including as modified), as separate holdings of a company for the purposes of corporation tax, and

(b) the securities that are comprised in those separate holdings (the “old holdings”) are, as at 1 January 2013, comprised in separate holdings of the company as determined by the rules in sections 119 to 121 (the “new holdings”).

(2) Each new holding is treated for the purposes of corporation tax on chargeable gains as if it were a holding of the company with a base cost and an indexation allowance as at 1 January 2013 equal to the total of the base costs and indexation allowances of the old holdings that are carried into the new holding.

(3) In the case of securities (“new securities”) comprised in a new holding, the amount of the base cost or indexation allowance of an old holding that is carried into the new holding is equal to the proportion which the new securities derived from the old holding bear to all of the securities comprised in the old holding.

(4) For the purpose of calculating the indexation allowance of a new holding in respect of any period falling on or after 1 January 2013, it is to be assumed that, on that date, there had been a disposal of the holding for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the company.

(5) For the purposes of this paragraph—

(a) references to a base cost are—

(i) in the case of a section 104 holding, references to the amount of qualifying expenditure within the meaning of section 110 of TCGA 1992, and

(ii) in the case of a 1982 holding, references to the amount of expenditure that would fall to be deducted if the holding were disposed of,

(b) references to an indexation allowance are—

(i) in the case of a section 104 holding, references to the indexation allowance as found in accordance with section 110 of TCGA 1992, and

(ii) in the case of a 1982 holding, references to the indexation allowance within the meaning of Chapter 4 of Part 2 of that Act,

(c) the base cost and the indexation allowance of an old holding are calculated on the assumption that the holding is disposed of immediately before 1 January 2013,

(d) “section 104 holding” has the same meaning as in section 104(3) of TCGA 1992, and

(e) “1982 holding” has the same meaning as in section 109 of that Act.