Taxation of Chargeable Gains Act 1992 section 169SC

Election by individual where company ceases to be personal company

Section 169SC allows an individual whose shareholding is diluted below the 5% threshold by a new share issue to elect to crystallise their accrued gain for business asset disposal relief purposes, by triggering a deemed disposal and reacquisition of their shares at market value.

• Where a company issues new shares for cash and this causes an individual's holding to fall below the 5% "personal company" threshold, the individual may elect to use this section to protect their accrued gain
• The election is only available if, immediately before the share issue, a hypothetical disposal of the individual's shares would have qualified as a material disposal of business assets eligible for business asset disposal relief
• The effect of the election is that the individual is treated as having disposed of and immediately reacquired all their shares and securities in the company at their relevant value just before the dilutive share issue
• The share issue must be wholly for cash and made for genuine commercial reasons, not as part of arrangements whose main purpose is to secure a tax advantage for any person