CG50604 - Share identification rules: section 104 holding: share reorganisations

An operative event need not necessarily be an acquisition or disposal. A taxpayer may pay for more shares in a company by taking up a rights issue. The share reorganisation rules of TCGA92/S127 treat the taxpayer as not having acquired the new shares. Instead the original shares and the new shares are treated as the same asset. However, TCGA92/S128 allows the taxpayer to claim a deduction for the payment he or she made for the new shares. That amount increases the qualifying expenditure on the Section 104 holding and therefore it is an operative event. There is an example involving a rights issue at CG50728.

Share reorganistions which involve the issue of shares of a different class will be operative events even where no additional payment is made - for example, bonus issues. This is because in these cases the pool of qualifying expenditure has to be apportioned between the separate classes of share. See CG51700+, and in particular the Examples at CG51920 and CG51930.