Taxation of Chargeable Gains Act 1992 section 138ZB

Treatment of securities connected with such exchanges

Section 138ZB ensures that certain securities connected with cross-border share exchanges involving close companies are treated as situated in the United Kingdom for capital gains tax purposes, preventing avoidance through the use of non-UK situs assets.

• Where section 138ZA applies to a share exchange involving a non-UK incorporated close company, specified securities are deemed to be UK-situated regardless of their actual location, covering the exchanged shares or debentures themselves and any further securities of the acquiring company obtained by the individual.
• The deemed UK situs extends to securities acquired through repo arrangements, stock lending arrangements, and subsequent share-for-share exchanges under sections 135 or 136, provided the individual retains a material interest in the company concerned.
• The UK situs treatment applies to securities held by the individual (P) or by P's spouse or civil partner (S), provided the security was transferred between them on a no-gain-no-loss basis under section 58; once S acquires such a security from P under section 58, the tracking rules apply to both P and S going forward.
• For the purposes of the tracking rules, it does not matter whether the individual gave consideration for the security or whether it is of a different class from the original exchanged shares or debentures.