Income Tax Act 2007 section 326

Restructuring to which sections 326A, 327 and 327A apply

Section 326 sets out the conditions under which a corporate restructuring — where a new holding company acquires all the shares of an existing company by issuing its own shares in exchange — can preserve the VCT qualifying holding status of the original shares, subject to HMRC approval and ongoing compliance.

• A new company must acquire all shares in the old company solely by issuing its own new shares on a like-for-like, proportionate basis, with no other consideration involved
• HMRC must give prior approval confirming the share exchange is for genuine commercial reasons and is not part of a tax avoidance scheme
• The beneficial treatment only applies where the old shares were originally issued to the company holding them and have been continuously held by that company until the exchange
• If the arrangements change or cease to qualify at any point before the new company has acquired all the old shares, the beneficial treatment is lost from that point onwards