Taxation of Chargeable Gains Act 1992 section 151BC

CITR: company reconstructions etc.

Section 151BC disapplies the normal capital gains tax share exchange and reconstruction rules where Community Investment Tax Relief (CITR) is attributable to shares or debentures involved in a company reconstruction or amalgamation, so that the investor is instead treated as making a disposal.

• Where CITR is attributable to shares or debentures held continuously since issue, the normal share-for-share exchange rules (which treat the exchange as a non-event for capital gains purposes) are switched off when a reconstruction or amalgamation occurs.
• A reconstruction or amalgamation for these purposes means a paper-for-paper exchange — one company issuing its own shares or debentures in exchange for shares or debentures in another company.
• The shares or debentures must have been held by the investor in the same capacity throughout, and the normal reorganisation and reconstruction provisions are overridden by this section.
• Because the share exchange rules are disapplied, the investor is treated as making a disposal of the original shares or debentures at the time of the reconstruction, triggering a potential chargeable gain or allowable loss.