Capital Acquisitions Tax Consolidation Act 2003 section 44

Arrangements reducing value of company shares

Section 44 counteracts avoidance of capital acquisitions tax through value-shifting arrangements in the shares of a private company, by deeming the increase in value of related shares to be a taxable gift or inheritance.

• Where an arrangement (including any act, omission, company resolution or combination thereof, made on or after 25 January 1989) shifts value out of one set of shares in a private company and into other "related shares", the owners of those related shares are deemed to take a taxable benefit equal to the increase in value (the "specified amount") from the person whose shares lost value.
• The rule applies regardless of how the shares are held: where the person whose shares lose value holds them absolutely, under a limited interest, or where the shares are held on discretionary trust — in each case, the specified amount is treated as a taxable gift or inheritance taken by the owners of the related shares in proportion to their respective increases in value.
• Where related shares are held in a trust with no ascertainable beneficial owners (a "related trust"), the disponer who created that trust is deemed to have taken the benefit; however, the disponer is not primarily accountable for the tax — the trustees of the related trust are primarily accountable instead.
• Tax arising under this section remains a charge on the related shares; the person accountable for the tax has power to sell, mortgage or place a terminable charge on those shares to fund payment; and where related shares are held on discretionary trust, the increase in value counts as trust property for the purposes of the annual discretionary trust tax charge under section 15.