Taxation of Chargeable Gains Act 1992 Schedule 2 paragraph 6

Pooling at value on 6th April 1965: exchange of securities etc.

Section 6 deals with what happens to a pooling election when quoted securities change their nature as a result of a share reorganisation or conversion, and how gains or losses are computed in those circumstances.

• When securities change their nature through a reorganisation or conversion (e.g. convertible loan stock becoming ordinary shares), the pooling election applies based on the nature of the securities at the date of disposal, not at the date they were originally acquired.
• If the election covered the original holding but does not cover the new type of security being disposed of, earlier disposals from the pool do not need to be recomputed; instead, the pre-6 April 1965 securities remaining in the pool are removed at their original pooled value, and the gain on the new disposal is calculated using the standard restriction rules.
• In the converse situation — where the election covers the new type of security but did not cover the original holding — the proportion of the new holding that derives from securities held on 6 April 1965 versus those acquired later is determined using the same apportionment method as the standard restriction rules.
• Only one of the two possible pooling elections (for quoted securities other than fixed-interest securities, or for fixed-interest securities) needs to have been made for these rules to apply; the key factor is whether the election matches the nature of the securities at the point of disposal.