Tyas & Company
Chartered Accountants, Registered Auditors, Tax, Financial & Business Advisors
Thursday, 02 August 2018 23:01

Capital Gains Tax: company takeovers

When a company takes over another company it may issue its own shares and/or securities in payment or part payment for the shares it’s buying. This is sometimes described as a share reorganisation.

Where certain conditions are met, when the old shares are exchanged for new shares, no capital gain will occur until the new shares are sold. For Capital Gains Tax (CGT) purposes the sale or disposal of any old shares is effectively treated as though the vendor acquired the new shares at the same time and at the same price as the old shares.

Where any cash payments are made for shares as a result of a takeover the monies received are subject to CGT as per the usual rules. There are exceptions, for example, when only a small amount of cash - compared with the value of your shares in the original company immediately before the takeover - is received as part of a takeover transaction. HMRC will accept that a cash receipt on a takeover is 'small' if either it's less than £3,000 in total, or it is not more than 5% of the value of the shares in the original company immediately before the takeover.

If your business could become the subject of a takeover we can help advice on the various options available to your business and the tax implications of each choice.

 

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Registered to carry on audit work in the UK by the 
Institute of Chartered Accountants in England and 
Wales and authorised and regulated by the 
Financial Conduct Authority for investment 
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