Taxes Consolidation Act 1997 Schedule 25A paragraph 5

Effect in relation to investee company of earlier company reconstruction etc.

Paragraph 5 ensures that where shares in an investee company are replaced by shares in another company as part of a reconstruction or amalgamation, the holding period of the original shares counts towards the 12-month holding requirement under section 626B.

• Where shares are exchanged for new shares under a reconstruction, amalgamation, or reorganisation (sections 584, 586, or 587), the original shares and the new holding are treated as the same asset for capital gains tax purposes.
• The 5% shareholding requirement under section 626B may be met by reference to the first company for periods before the exchange, even though the investor now holds shares in the second company.
• The rule prevents an investor company from losing the benefit of its prior holding period solely because a corporate restructuring resulted in replacement shares being issued.
• Where the shareholding requirement can be met by virtue of this paragraph, including through successive share-for-share transactions, it is treated as met.