Taxation of Chargeable Gains Act 1992 Schedule 7D paragraph 8

Disposal of rights under rights issue

Paragraph 8 of Schedule 7D provides an exemption from capital gains tax when trustees of a share incentive plan sell rights issued under a rights issue, provided the rights were offered in respect of all ordinary shares in the company.

• When a company makes a rights issue, the trustees of a share incentive plan may need to raise funds by selling some or all of the rights attaching to shares they hold on behalf of participants.
• Any gain arising from the disposal of these rights by the trustees (under paragraph 77 of Schedule 2 to ITEPA 2003) is exempt from capital gains tax.
• The exemption only applies where the rights issue offers similar rights in respect of all ordinary shares in the company — that is, it must be a general rights issue, not a selective one.
• If the rights issue does not extend to all ordinary shares in the company, any gain on the disposal of the rights will be a chargeable gain in the normal way.