This Practice Note is about the tax treatment of transactions in which a shareholder exchanges shares or debentures (for example, a loan note) in one company for shares or debentures in another company. This type of transaction is frequently encountered in corporate acquisitions where the buyer company will issue shares and/or debentures to the selling shareholders. The selling shareholders will exchange their existing shares or debentures for new shares and/or debentures instead of, or as well as, receiving cash. The purchase can include any combination of shares and debentures, eg shares can be issued for shares and debentures or debentures can be issued for debentures and shares. This acquisition structure clearly has a cash flow advantage for the buyer. For the selling shareholders, it is treated as a form of tax-neutral reorganisation. This means, broadly, that the selling shareholder is treated as having not made a disposal of their shares or debentures. Any accrued gain on those shares or debentures is deferred until the new shares or debentures in the buyer are sold.

This Practice Note is about the anti-avoidance rules in sections 137 and 139 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992). These anti-avoidance rules prevent tax-motivated transactions from benefiting from the tax reliefs that would otherwise apply to a share for share (or share for debentures) exchange or to a scheme of reconstruction. It is possible to seek clearance in advance that the rules will not apply. For more information about these tax reliefs, see Practice Notes: Share for share exchanges and qualifying corporate bonds (QCBs) and Tax reliefs for schemes of reconstruction. In this Practice Note, the anti-avoidance rules in TCGA 1992, s 137 are referred to as the ‘shareholder anti-avoidance rules’ and the anti-avoidance rules in TCGA 1992, s 139 are referred to as the ‘company anti-avoidance rules’. Note that the anti-avoidance rules were amended by Finance Act 2026 (FA 2026), with effect on and from 26 November 2025 (subject to transitional rules). This Practice Note explains: • the shareholder anti-avoidance rules that apply post–26 November 2025,

Introduction An initial public offering (IPO) is the first sale of stock by a company to the public. For further details on what an IPO involves, see: IPO—Main market—overview. A company that is subject to an IPO will need to consider the impact on any employee share plans it operates. This should be done as early as possible in the planning stages because it may be necessary to ensure the structure of the IPO takes into account the share plan aspects. In addition, an IPO will present an opportunity for a company to introduce new share plans (often opening them up to all employees for the first time) and it will normally be appropriate for the new plans to be in place before the company's shares are formally admitted to the market. Companies may also want to make grants or undertake an employee offer at the time of the IPO. This will require forward planning with appropriate disclosures incorporated into the prospectus. This Practice Note looks at the main considerations

A share incentive plan (SIP) allows tax-advantaged awards of shares to be made on an 'all-employee' basis by companies which meet the SIP eligibility requirements. The shares must be held by a UK-resident trustee. Four types of awards may be made under a SIP: free shares, partnership shares, matching shares and dividend shares. The legislation relating to SIPs sets out numerous requirements that must be met, including in relation to: • the individuals to whom awards are to be made • the shares that can be used for SIP awards • the terms on which the different types of shares are held, and • the terms of the trust and the obligations of the trustee This Flowchart focuses on the conditions that must be met in relation to the individuals to whom SIP awards are to be awarded in order to gain the income tax relief provided for in Part 7,

A share incentive plan (SIP) allows tax-advantaged awards of shares to be made on an 'all-employee' basis by companies which meet the SIP eligibility requirements. The shares must be held by a UK-resident trustee. Four types of awards may be made under a SIP: free shares, partnership shares, matching shares and dividend shares. The legislation relating to SIPs sets out numerous requirements that must be met, including in relation to:

Introduction This legal due diligence questionnaire relates to the proposed purchase by [insert buyer name] (the Buyer) of the entire issued share capital of [insert name of target company] incorporated in England and Wales under number [insert company number] (the Company) from [insert seller name] (the Seller) (the Proposed Acquisition). This questionnaire is designed to enable the Buyer, the Buyer’s solicitors and other professional advisers involved in the Proposed Acquisition to obtain the information which the Buyer requires in relation to the Company’s statutory tax advantaged share incentive plan(s) (SIP(s)) to assist in its valuation of the Company and assessment of the risks associated with the SIP(s). Please answer every question fully. Please provide your answers in italics underneath each question and provide copies of all relevant documentation, ensuring that all answers and documents are clearly marked by reference to the appropriate paragraph of this questionnaire. We reserve the right to raise further enquiries in respect of both

Summary of tax treatment The tax benefits available under a ‘Schedule 2 share incentive plan (SIP)’ are significant, both for the employee and the employer. Employees can save income tax and National Insurance contributions (NICs) at their applicable combined marginal rate if they choose to purchase partnership shares under a SIP, and then also benefit from tax-free growth in the value of shares purchased. In addition, any free, matching and dividend shares can also potentially be acquired and sold free of any income tax, NICs and capital gains tax (CGT). The employer can save on employer NICs and apprenticeship levy, which can be a significant overall saving if the SIP is participated in by a large number of employees. Shares acquired under a SIP need to be held for at least five years (dividend shares for three years) in order to enjoy a full income tax and NICs exemption, and this in itself can be an important retention mechanism. However, in many industries, five years is beyond

FORTHCOMING CHANGE: Following a call for evidence in 2020, the resulting outcome published in 2021, consideration by the relevant HMRC and industry working group and a 2023 consultation, the government confirmed in a consultation outcome published on 28 April 2025 that, in 2027, it intends to replace stamp duty and SDRT with a single self-assessed stamp tax on securities, generally in accordance with the proposals outlined in the 2023 consultation document. It was further confirmed as part of Budget 2025 on 26 November 2025 that this new single tax, to be known as the Securities Transfer Tax, would be self-assessed and paid (and reported) through a new online portal. Draft legislation in respect of the Securities Transfer Tax was published on 13 July 2026. For more information, see News Analyses: Legislation Day—Draft Finance Bill 2026–27—securities transfer tax, Tax update spring 2025—Stamp taxes on shares modernisation, Tax update spring 2025—Tax analysis—Stamp and transfer taxes, TAMD 2023—Stamp taxes on shares modernisation, TAMD 2023—consultation—stamp taxes on shares, Tax Administration

Implementation of MAR in the UK Regulation (EU) No 596/2014, the Market Abuse Regulation ( MAR), originally came into force on 3 July 2016 and was implemented directly into the UK. MAR provided a regulatory framework in relation to insider dealing, unlawful disclosure of inside information, market manipulation and measures to prevent market abuse. As a result, the Model Code in the Listing Rules published by the Financial Conduct Authority (FCA) was deleted, and amendments were made to the FCA's Disclosure Rules in relation to the disclosure of transactions by persons discharging managerial responsibilities (PDMRs) and persons closely associated with them (PCAs). The European Union (Withdrawal) Act 2018 (EU(W)A 2018) (as amended by the European Union (Withdrawal Agreement) Act 2020) created a framework and process for onshoring and preserving most EU and EU-derived law in order to ensure legal continuity following the UK’s exit from the EU. This included statutory instruments (SIs) which make amendments to EU legislation to ensure that it continued to operate effectively at the point at which the UK ceased to

What is a demerger? A demerger is a type of corporate reconstruction that divides businesses carried on by a company (or group of companies) so that, after the demerger, the trading activities are run by separate management but remain, at least initially, under the control of all or any of the same shareholders. This is often done in order to improve the management of distinct parts of the company's trading business or to ring-fence trade-specific liabilities or enhance shareholder value (if the sum of the parts is valued at more than the conglomerate). There are a number of ways of achieving a demerger, including: • a distribution in specie in the form of a dividend of shares in the demerging subsidiary to the shareholders in the parent company—this tends to be the most straightforward method • a return of capital in the form of shares in the demerging subsidiary to the shareholders in the parent company • a three-cornered demerger, where the parent company shareholders receive shares in a new company set up to hold the

Structure of public-to-private takeovers A public to private transaction is one where an unlisted company acquires a listed company, so that the target company becomes privately owned as a result. These types of transaction occur most commonly on a management buyout, where key executives of the listed company join with a private equity house in order to acquire the listed company. The acquisition will usually be structured as either: • a court sanctioned scheme of arrangement of the listed company, or • a general offer for the listed company's issued share capital Typically, a newly incorporated company will be used as the acquisition vehicle. The target listed company is very likely to have share incentive schemes in place which operate in relation to its shares. They may have extended such schemes not only to key executives but also to the wider workforce. The acquirer company will want to ensure that it acquires all of the existing shares in the target listed company under the transaction. Therefore, the treatment of employees' outstanding rights

The Share Incentives glossary pulls together key definitions of share incentives terms and provides links to relevant resources. The glossary is continuously enhanced as we identify further terms for inclusion, and currently comprises the following terms: Accelerated vesting Accelerated vesting allows an employee to speed up the original or standard vesting schedule by which the employee gains access to share awards and/or shares. Accelerated vesting often (but not always and not exclusively) happens on an ‘exit’ event. AIM A securities market established and operated by the London Stock Exchange plc that was launched on 19 June 1995. It allows smaller and medium-sized growth companies to float shares with lighter entry requirements and continuing obligations than the main regulated markets. Formerly the Alternative Investment Market, now simply known as AIM. For further information on the share scheme requirements and issues facing a company which trades on AIM, see Practice Notes: Share scheme issues for an AIM company and Continuing obligations of an AIM company. Annual general meeting (AGM) A general meeting that certain companies