Section 138ZA — Taxation of Chargeable Gains Act 1992: Share exchanges involving non-UK incorporated close companies

Share exchanges involving non-UK incorporated close companies 138ZA 1 Section 138ZB applies where—

a section 135 or 136 applies to an issue by a company (“ company B ”) of shares in or debentures of that company (“the exchanged shares or debentures”) in exchange for or in respect of shares in or debentures of another company (“ company A ”),

b immediately before the issue is made, company A is a close company which is incorporated in the United Kingdom (whether or not it is resident in the United Kingdom),

c immediately after the issue is made, company B is a close company which is not incorporated in the United Kingdom (whether or not it is resident in the United Kingdom),

and d the person to whom the exchanged shares or debentures are issued (“ P ”) is an individual who meets the conditions in subsection (2) .

2 Those conditions are that—

a immediately before the issue is made, P—

i has a material interest in company A, and ii is a participator in company A, and b immediately after the issue is made, P—

i has a material interest in company B, and ii is a participator in company B.

3 A person has a material interest in a company for the purposes of this section if condition A or B is met.

4 Condition A is that the person, an associate of the person, or the person or an associate of the person together with one or more associates is—

a the beneficial owner of, or b directly or indirectly able to control, more than 5% of the ordinary share capital of the company.

5 Condition B is that the person, an associate of the person, or the person or an associate of the person together with one or more associates possesses or is entitled to acquire such rights as would—

a in the event of the winding up of the company, or b in any other circumstances, give an entitlement to receive more than 5% of the assets which would then be available for distribution among the participators.

6 Chapter 2 of Part 10 of CTA 2010 (meaning of “close company” and related terms) applies for the purposes of this section but with the omission of section 442(a) (exclusion of non-UK resident companies).

7 In relation to a company that has no share capital, this section applies as if—

a references to shares in, or debentures of, the company included any interests of the company possessed by members of the company, and b the reference in subsection (4) to the ordinary share capital of the company were to all such interests.

8 In this section “ ordinary share capital ” has the meaning it has in the Corporation Tax Acts (see section 1119 of CTA 2010).