Taxation of Chargeable Gains Act 1992 section 169SE

Application of section 169SD where section 116 applies

Section 169SE deals with the interaction between deferred gains under the entrepreneurs' relief provisions and share reorganisations where the new holding includes qualifying corporate bonds (QCBs).

• Where an individual has elected to defer a gain under section 169SD and a subsequent share reorganisation results in QCBs replacing the original shares, the deferred gain must be calculated as if the original shares had been sold immediately before the reorganisation.
• When the QCBs are eventually disposed of, the deferred gain (or a proportionate part of it) is treated as accruing at that point, on top of any gain already arising under the normal section 116 rules and any actual gain or loss on the disposal.
• The normal QCB exemption (which would ordinarily exempt gains on disposal of QCBs) does not apply to the deferred gain element — it only applies to any gain that genuinely arises on the disposal itself.
• This prevents the deferred gain from escaping tax by being sheltered behind the QCB exemption following a reorganisation.