Income Tax (Earnings and Pensions) Act 2003 section 87

Consequences of company reconstructions

Section 87 sets out how shares held by participants in a Share Incentive Plan (SIP) are treated for tax purposes following a company reconstruction, ensuring that the tax treatment of old shares carries through seamlessly to the replacement new shares.

• After a company reconstruction, references to a participant's plan shares are read as referring to, or including, the new shares that replace them
• The reconstruction is not treated as a disposal, and new shares inherit the original award date, so that holding period requirements and tax-advantaged status are preserved
• If the eligibility conditions for the types of share that could be awarded were met for the old shares, they are automatically treated as met for the corresponding new shares
• All relevant income tax, dividend, and capital gains tax provisions that applied to the old shares continue to apply to the new shares on the same basis