Taxation of Chargeable Gains Act 1992 section 103H

Scheme of reconstruction involving issue of units

Section 103H provides capital gains tax relief when a collective investment scheme undergoes a reconstruction that involves issuing units in a new successor scheme to existing unit holders.

• When a collective investment scheme (scheme A) undergoes a reconstruction and units in a successor scheme or feeder fund (scheme B) are issued to participants in proportion to their existing holdings, with the original units being retained, cancelled or extinguished, the section applies to provide tax relief.
• Participants are treated as having exchanged their original holdings for the new units, and the standard share reorganisation rules (sections 127 to 131) apply as though both schemes were the same company — meaning no chargeable gain or loss arises at the time of the reconstruction.
• Where there are different classes of units in the original scheme, "relevant holdings" means holdings of the particular class of units involved in the reconstruction; any original units that are retained rather than cancelled are treated as if they had been cancelled and replaced by a new issue.
• The relief is conditional on the reconstruction being carried out for genuine commercial reasons and not forming part of a tax avoidance arrangement, as required by section 103K(1).