Taxation of Chargeable Gains Act 1992 section 140G

Treatment of securities issued on merger

Section 140G provides relief from capital gains tax charges for shareholders and debenture holders when their companies merge across borders to form a new or enlarged entity, provided certain conditions are met.

• The section applies to cross-border mergers forming a Societas Europaea (SE), a European Cooperative Society (SCE), or mergers where all assets and liabilities are transferred to a single existing or new company in exchange for shares or debentures issued to the transferor's security holders.
• Each merging company must be resident in a relevant state, but they must not all be resident in the same relevant state, and the merger must not already qualify as a scheme of reconstruction under the normal rules.
• Where the conditions are met, the merger is treated as a scheme of reconstruction, meaning shareholders and debenture holders in the transferor companies are not treated as having disposed of their securities — so no chargeable gain or allowable loss arises at the time of the merger.
• The usual anti-avoidance rules that can block reconstruction relief under section 137 are disapplied, but a separate set of anti-avoidance rules from section 140E applies instead.