Corporation Tax Act 2010 section 87

Relief after an exchange of shares for shares in another company

Section 87 ensures that where a company reconstruction involves exchanging shares in an old company for shares in a new company, with no real change in ownership, the share loss relief rules continue to apply seamlessly without the exchange itself triggering a disposal or acquisition.

• Where a newly formed company (with only subscriber shares) acquires all shares in an existing company purely in exchange for newly issued shares, and the exchange is not treated as a disposal under capital gains rules, this section ensures continuity of share loss relief entitlements.
• The share exchange is disregarded for the purposes of the share loss relief rules — it is not treated as a disposal of the old shares or an acquisition of the new shares.
• Certain restrictions that would normally apply — specifically the rules on disposal of new shares and the control and independence requirement — are switched off in relation to such qualifying share exchanges or arrangements leading to them.
• Old shares and new shares are treated as corresponding to each other if, were they shares in the same company, they would be of the same class and carry identical rights.