Income Tax (Trading and Other Income) Act 2005 section 712

Identification of shares after reorganisations etc.

Section 712 deals with how shares received following a company reorganisation (such as a bonus issue) are identified for the purposes of the venture capital trust dividend exemption.

• Where old shares qualified for the VCT dividend exemption, new shares received on a reorganisation inherit that qualifying status automatically.
• If only a proportion of the old shares met the exemption conditions, only the same proportion of the new shares are treated as qualifying — dividends on the remainder are not exempt.
• The conditions that must be inherited relate to the annual acquisition limit and, where relevant, the genuine commercial reasons test.
• The value of the new shares is disregarded when testing whether other shares acquired in the same tax year meet the annual acquisition limit.