Taxation of Chargeable Gains Act 1992 section 103K

Restriction on application of sections 103G, 103H and 103I

Section 103K is an anti-avoidance provision that restricts the tax reliefs available under sections 103G, 103H and 103I when units in a collective investment scheme are exchanged or issued as part of a scheme of reconstruction.

• The capital gains tax reliefs for exchanges and reconstructions of collective investment schemes only apply where the transaction is carried out for genuine commercial reasons and not as part of a tax avoidance arrangement.
• The anti-avoidance restriction does not apply where the participant receiving units holds no more than 5% of the units in the receiving scheme, though units held by connected persons count towards this 5% threshold.
• If a participant who is denied relief fails to pay the resulting tax within six months, HMRC can pursue any other participant who currently holds those units (having acquired them through a no-gain/no-loss transfer) for the unpaid tax.
• Participants can apply for advance clearance from HMRC to confirm that the anti-avoidance provision will not apply to a proposed transaction, using the procedure set out in section 138.