Taxation of Chargeable Gains Act 1992 Schedule 7AA paragraph 5

Special rule for disposal of pooled assets

Paragraph 5 of Schedule 7AA provides a special rule for calculating chargeable gains when a company disposes of assets that form part of a section 104 pool (i.e. a shared holding of securities of the same class), where some of the securities in the pool were acquired in transactions that benefited from the substantial shareholdings exemption regime.

• When a company disposes of securities from a section 104 pool, a special calculation is needed if some securities in the pool were acquired in exempt transactions under the substantial shareholdings exemption.
• The pool must be notionally split into two parts: one representing shares acquired in exempt no-gain/no-loss transactions, and the other representing the remaining shares acquired in normal taxable transactions.
• On any disposal from the pool, the shares sold are treated as coming proportionately from both the exempt and non-exempt parts of the pool, based on the relative sizes of each part at the time of disposal.
• This rule was introduced by the Finance Act 2006 and ensures that the substantial shareholdings exemption is correctly applied on a proportionate basis when pooled holdings include a mixture of exempt and non-exempt acquisitions.

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