Taxation of Chargeable Gains Act 1992 section 5

Fourth condition: compromise or arrangement with members [TCGA 1992 Sch 5AA para 5]

Section 5 sets out the fourth condition that must be met for a scheme of reconstruction to qualify for capital gains tax treatment, requiring that the scheme is carried out under a formal compromise or arrangement with members and that no business is transferred to another person.

• The scheme must be carried out under a compromise or arrangement governed by Part 26 or Part 26A of the Companies Act 2006, or equivalent legislation in a jurisdiction outside the United Kingdom
• These provisions of the Companies Act 2006 deal with arrangements and reconstructions involving companies and their members
• No part of the business of the original company (or any of the original companies) may be transferred to any other person under the scheme
• The scheme will typically involve cancelling shares in the original company and issuing shares in a successor company, accompanied by a new share issue by that successor company