VCM50560 - CVS: investors and reliefs: disposal of shares

FA00/SCH15/PARA46 & PARA96

Where, before the end of the qualification period related to any shares, the investing company disposes of any of those shares, the general rule is that the investment relief attributable to those shares must be reduced as explained at VCM50570. In this context ‘disposal’ means what it means for the purposes of CGT. Thus it covers the receipt of a distribution in a winding-up, the extinction of the shares and a deemed disposal of them resulting from a claim that their value has become negligible.

However, if the disposal is made by way of a bargain that is not at arm’s length (see CG14541), or for full consideration, the whole of the relief attributable to the shares disposed of must be withdrawn.

If the shares have to be exchanged for other shares as the result of a reorganisation, merger or take-over they will normally be regarded as disposed of. However, in certain circumstances (see VCM15200) the new shares are treated as if they were the old shares. The Inspector who deals with the issuing company will decide the correct treatment.

The investing company is obliged to make a report to the Inspector within 60 days after any disposal.