Taxation of Chargeable Gains Act 1992 section 227

Conditions for roll-over relief

Section 227 sets out the six conditions that must all be met for a person disposing of shares to an employee share ownership trust (ESOT) to claim roll-over relief under section 229, deferring the capital gains tax charge by reinvesting the proceeds in replacement assets. This relief was withdrawn for disposals on or after 6 April 2001, when ESOTs were replaced by share incentive plans (SIPs).

• The claimant must dispose of qualifying ordinary shares in the founding company to the trustees of a qualifying ESOT, where the founding company is a trading company or holding company of a trading group immediately after the disposal.
• The shares must be fully paid up, non-redeemable, and free from special restrictions, and the trustees must hold at least 10% of the founding company's ordinary share capital, distributable profits and winding-up assets at some point during the entitlement period.
• The full disposal proceeds must be reinvested within the acquisition period in replacement chargeable assets that are not shares in or debentures of the founding company or any company in the same group.
• There must be no unauthorised arrangements allowing the claimant or connected persons to reacquire the disposed shares, and no chargeable event must occur in relation to the trustees during the period from disposal to acquisition of replacement assets.