Where companies A, B and C are all in the same capital gains group and company A transfers the shares in company B to company C in exchange for an issue of shares by company C to company A, the following tax consequences may apply to the transaction:

1. •

   the chargeable gain accruing to company A may be exempt under the substantial shareholdings exemption (SSE) in Schedule 7AC to the Taxation of Chargeable Gains Act 1992 (TCGA 1992). For more information about when the SSE applies to a share sale, see Practice Note: Substantial shareholdings exemption

2. •

   the share exchange may for tax purposes be deemed not to involve a disposal by company A of its shares in company B, provided the conditions set out in TCGA 1992, s 135 are satisfied and the anti-avoidance condition in TCGA 1992, s 137 does not apply. Where section 135 applies, a modified