Taxes Consolidation Act 1997 section 739H

Investment undertakings: reconstructions and amalgamations

Section 739H provides that the exchange of units in investment undertakings as part of a scheme of reconstruction or amalgamation is not a chargeable event, preserving the original cost and acquisition date for the new units received.

• Where an investment undertaking transfers all its assets and liabilities to another undertaking in exchange for the issue of new units to the unit holders of the original undertaking, the cancellation of the old units is not a chargeable event provided the exchange is part of a genuine scheme of reconstruction or amalgamation.
• The new units are treated as having the same cost and the same acquisition date as the old units, so no gain or loss crystallises on the exchange itself.
• The relief extends to exchanges between sub-funds of different umbrella schemes, but only where the exchange is carried out for bona fide commercial reasons and not primarily for the purpose of avoiding tax.
• The same reconstruction and amalgamation relief applies to common contractual funds (CCFs) established under the Investment Funds, Companies and Miscellaneous Provisions Act 2005, allowing CCFs to reconstruct or amalgamate with each other without triggering a tax charge.