Share for share exchange

By Tolley

(Updated for Budget 2020)

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

Share for share exchange
Exchange of shares
Takeovers involving cash
Different classes of shares
Interaction with entrepreneurs’ relief

This guidance considers the capital gains tax implications where shares are sold in exchange for new shares.

The consideration paid by a purchasing company to the shareholder(s) for their shares in a target company could be in the form of either:

•new shares in the vendor in exchange for shares in the target company (a 'share for share exchange')

•cash

•loan notes issued by the vendor company, or

•a mixture of the above

This guidance covers the tax implications of consideration in the form of shares or a mixture of shares and cash.

For guidance on the tax implications of consideration in the form of loan notes see the Loan notes and Qualifying Corporate Bonds (QCBs) and non QCBs guidance note.

The timing of the consideration also needs to be considered. Consideration may be paid straight away or it may be deferred. Deferred consideration may be fixed or the amount may be variable.

For more information see the Tax treatment of earn-outs and deferred consideration guidance note.

Exchange of shares

Where shareholders disposing of their shares receive shares in the acquiring company, CGT is deferred if the ac