Section 626C Treatment of assets related to shares

(1) For the purposes of this section―

(a) an asset is related to shares in a company if it is―

(i) an option to acquire or dispose of shares in that company,

(ii) a security to which are attached rights by virtue of which the holder is or may become entitled, whether by conversion or exchange or otherwise, to acquire or dispose of―

(I) shares in that company,

(II) an option to acquire or dispose of shares in that company, or

(III) another security falling within this paragraph, or

(iii) an option to acquire or dispose of any security within subparagraph (ii) or an interest in any such security,

(b) in determining whether a security is within paragraph (a)(ii), no account shall be taken―

(i) of any rights attached to the security other than rights relating, directly or indirectly, to shares of the company in question, or

(ii) of rights as regards which, at the time the security came into existence, there was no more than a negligible likelihood that they would in due course be exercised to a significant extent.

(2) A gain accruing to a company (in this subsection referred to as the “first-mentioned company”) on the disposal of an asset related to shares in another company is not a chargeable gain if―

(a) (i) immediately before the disposal the first-mentioned company holds shares in the other company, and

(ii) any gain accruing to the first-mentioned company on a disposal at that time of the shares would, by virtue of section 626B, not be a chargeable gain,

or

(b) (i) immediately before the disposal the first-mentioned company does not hold shares in the other company but is a member of a group and another member of that group does hold shares in the other company, and

(ii) if the first-mentioned company, rather than the other member of the group, held the shares, any gain accruing to the first-mentioned company on a disposal at that time of the shares would, by virtue of section 626B, not be a chargeable gain;

and for the purposes of this paragraph “group” means a company which has one or more 51 per cent subsidiaries together with those subsidiaries.