Taxation of Chargeable Gains Act 1992 section 134

Compensation stock

Section 134 deals with the capital gains tax treatment of gilt-edged securities (government bonds) issued as compensation when shares are compulsorily acquired under statute, such as in a nationalisation.

• When shares are compulsorily acquired and gilt-edged securities are issued in exchange, the exchange is not treated as a disposal — instead, the gain or loss is calculated and held over until the gilts are subsequently sold
• The normal exemption from capital gains tax on gilt-edged securities does not apply to the held-over gain or loss, which is released in whole or in proportion on a later disposal of the gilts
• Certain transfers — between spouses or civil partners, between group companies, or from personal representatives to legatees — do not trigger the held-over gain, which instead passes to the transferee for release on their future disposal
• Where compensation gilts are not issued immediately but a right to receive them is granted on the date of compulsory acquisition, selling that right is treated as a disposal of the gilts and will release the held-over gain