Reconstructions involving transfer of business

Produced by Tolley
Reconstructions involving transfer of business

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Reconstructions involving transfer of business
  • Reconstructions involving share issues
  • Reconstructions involving the transfer of a business

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 information on the rules relating to share for share exchanges, see the Share for share exchange guidance note.

Reconstructions involving share issues

TCGA 1992, s 136 deals with reconstructions involving the issue of shares. This section applies where:

  1. an arrangement between a company (Company A) and either:

    1. the persons holding shares in or debentures of the company

    2. where there are different classes of shares in or debentures of the company, the persons holding any class of those shares or debentures

  2. it is entered into for the purposes of, or in connection with, a scheme of reconstruction, and under the arrangement:

    1. another company (Company B) issues shares or debentures to those persons in respect of, and in proportion to (or as nearly as may be in proportion to), their relevant holdings in Company A

    2. the shares in or debentures of Company A comprised in relevant holdings are retained by those persons or are cancelled or otherwise extinguished

Where this section applies:

  1. those persons are treated as exchanging their relevant holdings in Company A for the sha

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