Taxation of Chargeable Gains Act 1992 section 236O

No section 236H relief if disqualifying event in next four tax years

Section 236O provides that capital gains tax relief on a disposal to an employee ownership trust is withdrawn or prevented if a disqualifying event occurs within the four tax years following the tax year of disposal.

• If a disqualifying event occurs within the four tax years after the tax year of disposal, no new claim for relief can be made from the date of that event, and any existing claim is automatically revoked as if it had never been made.
• Disqualifying events include: the company ceasing to trade, the trust failing to meet the all-employee benefit, controlling interest, or trustee independence requirements, the trustees ceasing to be UK resident, the participator fraction exceeding two-fifths, or the trustees acting outside the terms permitted by the all-employee benefit requirement.
• Where a disqualifying event relating to trustee UK residence or trustee independence arises solely because of the death of a trustee (or a director of a corporate trustee), the event is ignored provided the requirement is restored within six months of the death.
• HMRC may make any necessary adjustments to assessments to claw back the relief, and normal time limits for making such adjustments do not apply.