»Ê¹ÚÌåÓýapp

TCGA92/S29 (2)

»Ê¹ÚÌåÓýapp value shifting rules apply if a person who controls a company exercises that control so that value passes out of

• shares in the company owned by that person, or others connected with that person;

or

• rights over the company exercisable by that person, or others connected with that person.

If these conditions are satisfied TCGA92/S29 (2) provides that there is a disposal of the shares or rights out of which the value passes. For further advice as to the meaning of control, see CG14620.

Example

• J Ltd was set up in May 2007 by Mrs Jones and her son. Mrs Jones held 900 £1 ordinary shares, and her son held 100 £1 ordinary shares.
• In October 2012 Mrs Jones arranged that the company would amend the rights attaching to its share capital. »Ê¹ÚÌåÓýapp shares which she held were reduced to the status of preference shares carrying a 5 per cent dividend. »Ê¹ÚÌåÓýapp shares held by her son became A' ordinary £1 shares, with all other rights of voting, profits, and on liquidation. This reduced the value of Mrs Jones' £1 ordinary shares and passed value into the Aâ€� ordinary £1 shares held by her son.

Shares and Assets Valuation agree that the value of Mrs Jonesâ€� holding immediately prior to the amendments was £9,000. Following the amendments, her shares were worth no more than par, £900. »Ê¹ÚÌåÓýapp value passing into the son’s shares is £9,000 - £900 = £8,100.

»Ê¹ÚÌåÓýapp value shifting rules treat Mrs Jones as having disposed of her shares. This will be a part disposal; the proportion of the cost attributable to the part disposed of will be

£8,100 = 90%

£8,100 + £900

You compute Mrs Jones� chargeable gains as follows.

Section 104 Holding

-	Number of shares	Pool of qualifying expenditure	-
2005	900	900	-
part disposal	-	810	-
-	900	90	-
Pool of qualifying expenditure	£900 x 90%	=	£810
-	-	-	£
-	-	Disposal proceeds	8,100
less	Cost	-	810
-	-	Chargeable gain	7,290

You treat Mrs Jones� son as though he incurred relevant allowable expenditure on his shares of £8,100 in October 2012. This is added to the original cost of his shares, £100.