VCM48010 - VC loss relief: special rules for share reorganisations: introduction

ICTA88/S575 (2)

It is explained in VCM45200 that there are special rules if the shares on which the losses are claimed were issued to the claimant as a result of:

• a rights issue or other share reorganisation under TCGA92/S127, see CG51700 onwards, or
• a share exchange, reconstruction or amalgamation, to which the provisions of TCGA92/S127 were applied by the operation of TCGA92/S135 or TCGA92/S136, see CG52500 onwards.

ICTA88/S574 only applies to shares in a qualifying company that the claimant acquired by subscription. The special rules of ICTA88/S575 (2) are needed for two reasons:

• Technically a share exchange in which one company issues shares in exchange for shares in another company is a subscription. Therefore, a share exchange could convert purchased shares into subscribed shares. Also, it would be possible to exchange shares in a non-qualifying company for shares in a qualifying company.
• In a rights issue the shareholder pays the company for the new shares. These shares can qualify for relief to the extent that the claimant gave consideration for them even if the original holding of shares did not qualify.