CG17910 - Taper relief: qualifying holding period: share reorganisations

TCGA92/S127

A share reorganisation is an increase, decrease, or other alteration in a company's share capital which is not treated as a disposal of the taxpayer's existing shares, nor an acquisition of any new shares. The commonest types of share reorganisation are bonus issues, rights issues and capital reductions.

The share reorganisation rules are extended to certain company take-overs and reconstructions or amalgamations. General guidance on company reorganisations is at CG51700+, and on company reconstructions and amalgamations at CG52500+.

Where TCGA92/S127 has applied to a share reorganisation, so that the new holding of shares is treated as having been acquired as the original holding of shares was acquired, the qualifying holding period for the new holding begins with the date of acquisition of the original holding, or with 6 April 1998 if later.

- EXAMPLE

In August 1994 an individual acquires 10,000 £1 `A' shares in a company. In February 2001 the company makes a rights issue of one 50p `B' share for each 2 `A' shares held at 30p per `B' share. The individual takes up his rights, pays £1,500, and receives 5,000 `B' shares.

The rights issue is a company reorganisation. The individual is treated as acquiring the 5,000 `B' shares when the 10,000 `A' shares were acquired. The qualifying holding period for both the `A' shares and the `B' shares begins on 6 April 1998.