Taxation of Chargeable Gains Act 1992 section 149AB

Shares in research institution spin-out companies

Section 149AB deals with how the base cost of shares acquired in research institution spin-out companies is calculated for capital gains tax purposes.

• When an employee or researcher acquires shares in a spin-out company from a research institution at below market value, this section adjusts the base cost of those shares for future capital gains tax calculations.
• The base cost is the total of the actual price paid for the shares plus any amount that was taxed as employment income on the acquisition.
• This ensures the individual is not taxed twice on the same economic gain — once as employment income and again as a capital gain on a later disposal.
• The adjusted base cost only applies to the individual acquiring the shares; it does not affect the disposal consideration calculated for the person transferring the shares.