Income Tax (Earnings and Pensions) Act 2003 section 86

Company reconstructions

Section 86 defines what counts as a "company reconstruction" for the purposes of Share Incentive Plans, and sets out how certain excluded share issues are treated when they arise during such a reconstruction.

• A company reconstruction is a transaction affecting a participant's plan shares (the "original holding") that results in a new holding being treated as equivalent to the original for capital gains tax purposes
• The definition also covers situations where the new holding would be equated with the original but for the fact that it consists of or includes a qualifying corporate bond
• An "excluded issue of shares" — such as certain redeemable shares, bonus issues or stock dividends that give rise to an income tax charge — does not by itself count as a company reconstruction
• If an excluded issue of shares forms part of a wider company reconstruction, the excluded shares are disregarded and do not form part of the new holding