Taxation of Chargeable Gains Act 1992 Schedule 7 paragraph 7

Reduction peculiar to disposal of shares

Section 7 restricts the amount of held-over gain on a disposal of shares where the company (or trading group) holds non-business assets among its chargeable assets, by scaling the relief down in proportion to the ratio of business assets to total chargeable assets.

• Where a company's chargeable assets include non-business assets, the held-over gain is reduced by the fraction: market value of chargeable business assets divided by market value of all chargeable assets.
• The restriction applies if, at any time in the 12 months before disposal, the transferor held at least 25% of the company's voting rights, or (for an individual) the company was their personal company.
• A business asset is one used for the purposes of a trade, profession or vocation carried on by the company or a group member; a chargeable asset is one whose disposal would give rise to a chargeable gain.
• For disposals of shares in a holding company of a trading group, inter-group shareholdings are excluded from chargeable assets, and a partly owned subsidiary's chargeable assets are scaled down in proportion to the holding company's ownership of its ordinary share capital.