Taxation of Chargeable Gains Act 1992 section 140H

Share exchanges

Section 140H extends the normal share-for-share exchange rollover relief to situations where one or both of the companies involved is a "transparent entity" (such as certain partnerships or other entities recognised under the EU Mergers Directive), and provides rules to prevent double taxation arising from such exchanges.

• The section applies where Company B issues shares or debentures in exchange for shares or debentures in Company A, and at least one of those entities is a transparent entity listed under the EU Mergers Directive.
• It broadens the definition of "company" in the normal share exchange rules so that it covers entities listed in the Mergers Directive, and it disapplies the usual requirement in section 135(3) that the exchange must be for bona fide commercial reasons.
• Where the exchange would have triggered a tax charge in another member State but for the Mergers Directive, UK double taxation relief applies as though that foreign tax had actually been charged.
• When calculating the notional foreign tax for double taxation relief purposes, losses on the exchange must be set against gains (as far as the other State's law allows), and any relief available to Company A under that law is assumed to have been claimed.