The ownership tests have to be satisfied in respect of the
particular shares transferred. Where the transferor acquired
additional shares during the 2 years prior to the transfer and it
is claimed that the shares transferred derived from the holding
acquired earlier, the agents should be asked to provide the
necessary evidence - such as a copy of the relevant entries in the
register of transfers or of the relevant share certificates.
However if, exceptionally, firm evidence does not exist (for
example because, following a reorganisation of the share capital, a
fresh certificate was issued to cover the whole of the transferor's
holding) relief may be given to the extent that it would be
available
on thebasis of a 'first in - first out' assumption.
For the purposes of the two-year ownership test property
acquired on an earlier death is deemed to have been owned from the
date of death - or, if the earlier death was that of a spouse, from
the date that spouse acquired the property (s.108). There is
however no provision corresponding to the latter for lifetime
transfers between spouses; in that case the ownership period of the
transferee spouse runs only from the time of the transfer to
him/her.
A bonus or rights issue should not normally be regarded as a
newly acquired holding for the purpose of the ownership tests.
Provided the bonus or rights shares were issued in proportion to
all the shares of a company - or to all the shares of a particular
share class - the allotment to the transferor will come within
s.107(4). Care needs to be taken with rights issues, however, and
all cases involving them should be referred to the Appeals
Team.
Under s.107(2) where the ownership test is satisfied by virtue
of s.107(1) relief is restricted to what it would have been had the
replacement - or any earlier replacement to be taken into account -
not been made. This restriction applies to all replacements, except
a replacement involving the company's take-over of a former
unincorporated business of the controlling shareholder.
The restrictions, where applicable, limit relief to the
lowest value - viz. of the transferred property, the replaced
property, and any earlier replaced property taken into account. For
this purpose the value of any replaced property should be
ascertained at the time of replacement.
It may be noted that these replacement provisions relate to
any replaced property which constituted 'relevant business
property' within s.105(1) and not just to shares and
securities.
| Additional Guidance: SVM150000 |
