Sometimes a reorganisation will be more complex than a simple share for share exchange. The ‘paper for paper’ rules relating to share for share exchanges (discussed in the Share for share exchange guidance note) are therefore extended to deal with reconstructions. What constitutes a scheme of reconstruction is discussed in detail below.
Relief is available to shareholders where there is a reconstruction involving the issue of shares and then also either a scheme of arrangement with the members or the transfer of a business. These are considered in more detail below.
More complicated reconstructions are also used when a demerger process is being undertaken. These are discussed in the demergers series of guidance notes, see the Demergers ― overview guidance note as a starting point.
Scheme of reconstruction
Both reconstructions involving a scheme of arrangement (TCGA 1992, s 136) and reconstructions involving the transfer of a business (TCGA 1992, s 139) require us to look at TCGA 1992, Sch 5AA for the definition of a ‘scheme of reconstruction’.
This says:
- •
the scheme involves the issue of ordinary share capital
Continue reading the full document
To gain access to additional expert tax guidance, workflow tools, generative tax AI, and tax research, register for a free trial of Tolley+™
Access this article for free with a 7 day trial of Tolley+™ Guidance and benefit from:
- Expert practical tax guidance
- Ready-made templates, step-by-step-guides, interactive flowcharts and checklists
- The latest news updates, insights and analysis
Popular Articles
Exporting goods ― proof of export
Exporting goods ― proof of exportIn addition to the requirements laid down in the Exporting goods ― overview guidance note, businesses intending to zero-rate exported goods must hold satisfactory evidence that the goods have been delivered to a destination outside of the UK. If satisfactory evidence
Relief for employee share schemes
Relief for employee share schemesRemuneration expenses are generally deductible for corporation tax purposes as they are considered to be incurred wholly and exclusively for the purposes of the trade. However, expenses relating to shares are usually classed as capital and are therefore not
Carried-forward losses restriction
Carried-forward losses restrictionOverview of the carried-forward loss restrictionAn important restriction in the use of losses carried forward was introduced by Finance (No 2) Act 2017. Subject to a de minimis of £5m (known as the deductions allowance), most carried-forward losses are restricted to
