Taxes Consolidation Act 1997 section 751A

Exchange of shares held as trading stock

Section 751A provides share-for-share relief to financial traders, ensuring that when shares held as trading stock are exchanged in a reorganisation, reconstruction or amalgamation, the exchange is not treated as a taxable disposal for income tax or corporation tax purposes.

• Where a securities dealer exchanges original shares held as trading stock for a new holding under a reorganisation, reconstruction or amalgamation, the exchange is not treated as a disposal and no trading profit arises under Schedule D Case I.
• The new holding is treated as the same asset as the original shares, mirroring the capital gains tax share-for-share reliefs available under sections 584 to 587 but applied within the income tax and corporation tax trading computation.
• If the dealer receives any consideration in addition to the new holding (such as cash), the relief is restricted proportionately: only the fraction of the original shares represented by the market value of the new holding relative to the total consideration qualifies for relief, and the balance is a taxable trading receipt.
• The same rules apply, with necessary modifications, to the notional Case I computation used in calculating the tax liability of the life fund of a life assurance company under section 707(4).