IFM16320 - Exchange of shares for those in another investment fund
Section 135 Taxation of Chargeable Gains Act 1992
This section applies in three cases where investment fund 鈥楤鈥� issues shares or debentures in exchange for shares or debentures in investment fund 鈥楢鈥�.
Case 1
- Where 鈥楤鈥� holds or in consequence of the exchange will hold, more than 25% of the ordinary share capital of 鈥楢鈥�.
Case 2
- Where 鈥楤鈥� issues the shares or debentures in exchange for shares as a result of a general offer:
- made to members of 鈥楢鈥� or any class of them (with or without exceptions for persons connected with 鈥楤鈥�), and
- made in the first instance on a condition such that if it were satisfied 鈥楤鈥� would have control of 鈥楢鈥�.
Case 3
- Where 鈥楤鈥� holds, or in consequence of the exchange will hold, the greater part of the voting power in 鈥楢鈥�.
If any of these cases apply, chargeable gains rules apply as if CIS 鈥楢鈥� and CIS 鈥楤鈥� were the same company - see CG51700C. In summary, the exchange of shares in 鈥楤鈥� for shares in 鈥楢鈥� is treated as not a disposal for chargeable gains purposes and the 鈥楤鈥� shares are treated as having been acquired at the same time as the original 鈥楢鈥� shares.
Section 135 only applies where the arrangements take place for bona fide commercial reasons and not for the avoidance of tax 鈥� see IFM16350.