Reconstructions involving transfer of business

By Tolley
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The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Reconstructions involving transfer of business
  • Reconstructions involving share issues

The 'paper for paper' rules relating to share for share exchanges are extended to deal with reconstructions. Relief is available to shareholders where there is a reconstruction involving the issue of shares, and when there is a reconstruction involving the transfer of a business. These are considered in more detail below.

For guidance on the rules relating to share for share exchanges see the Share / loan note exchanges guidance note.

Reconstructions involving share issues

Reconstructions involving the issue of shares are dealt with by TCGA 1992, s 136. This section applies where:

  • an arrangement between a company ('company A') and one of the following is entered into for the purposes of, or in connection with, a scheme of reconstruction:
    • the persons holding shares in or debentures of the company, or
    • where there are different classes of shares in or debentures of the company, the persons holding any class of those shares or debentures

and

  • under the arrangement:

    More on Selling the family business: