CGT15 Takeovers & Reorganisations Flashcards
A takeover occurs when ….
one company acquires more than 50% of the shares in another
company.
The consideration paid to the original shareholder could be in the form of ….
shares in the new company, in cash or a mixture of both.
‘Share for share’ exchanges are ……
not a disposal for CGT. The new shares are simply treated as if they were bought at the same time and for the same price as the old shares.
This is only the case if the share for share exchange is for bona fide commercial reasons.
To the extent cash is received on a takeover…..
Any remaining original cost not allocated to the cash part disposal …..
a gain will arise and will be taxed immediately. The gain is calculated using the part disposal rules.
must be the base cost of the shares received at takeover.
If more than one type of shares is received ….
For quoted shares, the cost is allocated based on ….
For unquoted shares, the cost is allocated based on …
the base cost is allocated to them based on their respective market values.
the market values at the date of the takeover.
the market values at the date of each disposal.
It is possible to make an election to ….
disapply the ‘share for share’ rules on a takeover.
Why might disapplying the share for share rules be advantageous?
Business asset disposal relief may then be due to reduce any gain arising. The new shares will then have a CGT base cost equal to their value at takeover.
In a takeover, if the shares qualify for investors relief?
A similar election is available where a disposal of the original holding would qualify for investors’ relief.
In most cases, it is likely that the new shares would also qualify for investors’ relief making the election unnecessary.
Where a share reorganisation results in an acquisition of a different class of shares, the new shares will …..
Where the shares are quoted, the apportionment is made …
Where the shares are unquoted, the apportionment is made …
take on part of the base cost of the original shares.
using the market values at the date of reorganisation.
using the market values at the date of the relevant disposal.
