Taxation of Chargeable Gains Act 1992 section 140K

Transparent entities: taxation after merger etc.

Section 140K deals with how to calculate chargeable gains when a person disposes of an interest in an asset held by a transparent entity that received assets through a qualifying merger or transfer, and that person had already been taxed on a gain when exchanging their shares or debentures in the original company for an interest in the transparent entity.

• The section applies where a transparent entity (company A) receives assets on a qualifying merger or transfer, and a person (X) obtains an interest in company A by exchanging shares or debentures in another company (company B)
• X must have realised a chargeable gain on the disposal of shares or debentures in company B, and the calculation of that gain must have reflected the value of a specific asset of company B
• When X later disposes of their interest in that same asset (now held through the transparent entity), the allowable acquisition cost is set at the value of the asset that was used when computing the earlier gain on the company B shares or debentures
• An interest in the transparent entity is broadly defined and includes an interest in its assets, shares in it, or debentures of it