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Income and Corporation Taxes Act 1988

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Changes over time for: Cross Heading: Company reconstructions

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Changes to legislation:

Income and Corporation Taxes Act 1988, Cross Heading: Company reconstructions is up to date with all changes known to be in force on or before 19 March 2024. There are changes that may be brought into force at a future date. Changes that have been made appear in the content and are referenced with annotations. Help about Changes to Legislation

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Whole provisions yet to be inserted into this Act (including any effects on those provisions):

  • s. 109A(4B) inserted by 2005 c. 7 Sch. 4 para. 6(3) (This amendment not applied to legislation.gov.uk. The amending provision (2005 c. 7, Sch. 4 para. 6) repealed retrospectively by 2005 c. 22, Sch. 6 para. 4(1)(6))
  • Sch. 19AB para. 5(5)(a)(b) words substituted by S.I. 2001/3629 art. 52(2)(n) (This amendment not applied to legislation.gov.uk. The words to be substituted do not occur in Sch. 19AB para. 5)

Company reconstructionsU.K.

5(1)M1This paragraph applies where there occurs in relation to any of a participant’s shares (“the original holding”) a transaction which results in a new holding being equated with the original holding for the purposes of capital gains tax; and any such transaction is referred to below as a “company reconstruction”.U.K.

(2)Where an issue of shares of any of the following descriptions (in respect of which a charge to income tax arises) is made as part of a company reconstruction, those shares shall be treated for the purposes of this paragraph as not forming part of the new holding, that is to say—

(a)redeemable shares or securities issued as mentioned in [F1condition C or D in section 1000(1) of CTA 2010];

(b)share capital issued in circumstances such that [F2section 1022 of CTA 2010] applies; and

(c)share capital to which [F3section 1049 of CTA 2010] applies.

(3)In this paragraph—

  • corresponding shares”, in relation to any new shares, means those shares in respect of which the new shares are issued or which the new shares otherwise represent;

  • new shares” means shares comprised in the new holding which were issued in respect of, or otherwise represent, shares comprised in the original holding; and

  • original holding” has the meaning given by sub-paragraph (1) above.

(4)Subject to the following provisions of this paragraph, in relation to a profit sharing scheme, references in the relevant provisions to a participant’s shares shall be construed, after the time of the company reconstruction, as being or, as the case may be, as including references to any new shares, and for the purposes of the relevant provisions—

(a)a company reconstruction shall be treated as not involving a disposal of shares comprised in the original holding;

(b)the date on which any new shares are to be treated as having been appropriated to the participant shall be that on which the corresponding shares were appropriated; and

(c)the conditions in paragraphs 10 to 12 and 14 of Schedule 9 shall be treated as fulfilled with respect to any new shares if they were (or were treated as) fulfilled with respect to the corresponding shares.

(5)In relation to shares comprised in the new holding, section 186(5) shall apply as if the references in that subsection to the initial market value of the shares were references to their locked-in value immediately after the company reconstruction, which shall be determined as follows—

(a)ascertain the aggregate amount of locked-in value immediately before the reconstruction of those shares comprised in the original holding which had at that time the same locked-in value; and

(b)distribute that amountpro rata among—

(i)such of those shares as remain in the new holding, and

(ii)any new shares in relation to which those shares are the corresponding shares, according to their market value immediately after the date of their reconstruction;

and section 186(5)(a) shall apply only to capital receipts after the date of the reconstruction.

(6)For the purposes of the relevant provisions if, as part of a company reconstruction, trustees become entitled to a capital receipt, their entitlement to the capital receipt shall be taken to arise before the new holding comes into being and, for the purposes of sub-paragraph (5) above, before the date on which the locked-in value of any shares comprised in the original holding falls to be ascertained.

(7)In the context of a new holding, any reference in this paragraph to shares includes securities and rights of any description which form part of the new holding for the purposes of Chapter II of Part IV of the [F41992] Act.

Textual Amendments

F1Words in Sch. 10 para. 5(2)(a) substituted (1.4.2010 with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), Sch. 1 para. 138(a) (with Sch. 2)

F2Words in Sch. 10 para. 5(2)(b) substituted (1.4.2010 with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), Sch. 1 para. 138(b) (with Sch. 2)

F3Words in Sch. 10 para. 5(2)(c) substituted (1.4.2010 with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), Sch. 1 para. 138(c) (with Sch. 2)

F4Word in Sch. 10 para. 5(7) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 10 para. 14(58) (with ss. 60, 101(1), 171, 201(3))

Marginal Citations

M1Source—1978 s.57; 1979(C) Sch.7

[F55A(1)Paragraph 5(2) to (6) above apply where there occurs in relation to any of a participant’s shares (“the original holding”) a relevant transaction which would result in a new holding being equated with the original holding for the purposes of capital gains tax, were it not for the fact that what would be the new holding consists of or includes a qualifying corporate bond; and “relevant transaction” here means a transaction mentioned in Chapter II of Part IV of the 1992 Act.U.K.

(2)In paragraph 5(2) to (6) above as applied by this paragraph—

(a)references to a company reconstruction are to the transaction referred to in sub-paragraph (1) above;

(b)references to the new holding are to what would be the new holding were it not for the fact mentioned in sub-paragraph (1) above;

(c)references to the original holding shall be construed in accordance with sub-paragraph (1) above (and not paragraph 5(1));

(d)references to shares, in the context of the new holding, include securities and rights of any description which form part of the new holding.

(3)In sub-paragraph (1) above “qualifying corporate bond” shall be construed in accordance with section 117 of the 1992 Act.]

Textual Amendments

F5Sch. 10 para. 5A inserted (with effect in accordance with s. 101(8) of the amending Act) by Finance Act 1994 (c. 9), s. 101(4) (with s. 101(13))

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