Taxes Consolidation Act 1997 section 514

Company reconstructions, amalgamations, etc

Section 514 provides rules to ensure that, where shares held under an approved profit sharing scheme are replaced by new shares or securities as part of a company reconstruction, the new shares stand in the place of the original shares for all purposes of the scheme.

• Where a company reconstruction results in new shares replacing original scheme shares, the new shares are treated as having been allocated on the same date as the originals, and scheme conditions already met carry over to the new shares.
• The locked-in value of the original shares is apportioned among the new shares (and any surviving original shares) in proportion to their market values immediately after the reconstruction.
• Where a capital receipt arises as part of the reconstruction, the locked-in value of the original shares is reduced by that receipt before the apportionment to the new shares is carried out, and only capital receipts arising after the reconstruction can further reduce the new locked-in values.
• If shares are issued as part of a reconstruction in circumstances that give rise to a distribution charge under section 131(2), those shares are not treated as forming part of the new holding and should instead be passed directly to the participant.