GIM5240 - Taxation of the investment return: investment gains: paper for paper exchange of assets
Investments of an insurance company held as trading assets on realisation basis may be exchanged for shares in another company. This is generally regarded as realisation of the investments. But see GIM5250.
In computing the profits of the year in which the transaction takes place, the fair value of the shares received (whether immediately convertible into money or not) is, in the absence of specific legislation, regarded as the proceeds of realisation of the investments - see Royal Insurance Company Limited v Stephen 14TC22 and Gold Coast Selection Trust Limited v Humphrey 30TC209. The exercise of an option is not, though, regarded of itself as giving rise to any profit at that point - see Varty v British South Africa Company 42TC406.