Taxation of Chargeable Gains Act 1992 section 128

Consideration given or received by holder

Section 128 deals with how consideration paid or received by a shareholder during a share reorganisation is treated for capital gains tax purposes.

• Any consideration a shareholder pays for a new holding (e.g. in a rights issue) is treated as part of the original cost of the original shares, increasing the base cost for a future disposal.
• Certain items are not treated as consideration for the new holding, including the surrender or cancellation of original shares, and amounts paid up using the company's own assets or undistributed dividends.
• For non-arm's length reorganisations on or after 10 March 1981, the consideration that can be added to the base cost is capped at the increase in market value of the holding resulting from the reorganisation.
• Any consideration received by a shareholder (other than the new holding itself), such as a capital distribution or payment from other shareholders for surrendered rights, is treated as a part disposal of the original shares.

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