CG17923 - Taper relief: anti-avoidance rules: example

An individual owns all of the shares in 2 companies: 900 in Littleco Ltd acquired for £900 in 2002, which are now worth £9,000; 100 shares in Bigco Ltd acquired for £100,000 in 2010, now worth £991,000. An attractive offer is received in 2012 to sell the shares in both companies. Before disposing of the shares, the taxpayer arranges that Littleco Ltd should acquire all of the shares in Bigco Ltd in consideration of Littleco Ltd issuing 100 shares to the shareholder. The revised holding of shares in Littleco Ltd is now 1,000 shares worth £1m. 900 of these were acquired in 2002, and the remaining 100 shares would, if the reorganisation rules (see CG51700+) apply, be treated as the same asset as the Bigco Ltd shares and as acquired in 2010. However, the 900 shares acquired in 2002 are now worth at least £900,000 (rather than £9,000) and the 100 shares deemed to have been acquired in 2010 are worth at most £100,000; there has been a value shift into the 900 shares so that when the 1,000 shares are sold, the gain on the 900 shares could (apart from paragraph 12) qualify for a taper with a longer qualifying holding period.

In this example there has been a value shift within the definition of paragraph 12 from the shares acquired in 2010 to those acquired in 2002. In these circumstances for the 900 shares the period up to the date of transfer of value is treated as a period that does not count for taper relief. The qualifying holding period of the 100 shares deemed to have been acquired in 2010 will run from 2010.