Corporate reorganisations and reconstructions are afforded special tax treatment intended to make these arrangements neutral for the purposes of taxation on chargeable gains. Without this special regime, the arrangements would result in disposals giving rise to capital gains tax or corporation tax on chargeable gains.
Reliefs are available both for shareholders and, where relevant, the company being reorganised.
The underlying policy rationale is that, as there is no substantial change in the economic ownership of the underlying business of the reorganised or reconstructed company, and to the extent no value is extracted, such transactions should not be taxed.
The tax relief afforded to reorganisations ensures that companies retain the flexibility to arrange their capital structure in the way they see best.
Reorganisations of share capital involve a single company. They include transactions that increase or reduce a company's share capital.
Reorganisations involve new shares or debentures (the new holding) being issued by the reorganised company to its shareholders in respect of and in proportion to their shareholding before the reorganisation (the original shares).
A reorganisation can be restricted to a particular class of shares.
The
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