Taxation of Chargeable Gains Act 1992 Schedule 5B paragraph 11

Pre-arranged exits

Section 11 of Schedule 5B prevents capital gains tax deferral relief where the investment in eligible shares is accompanied by pre-arranged exit routes or risk-reduction schemes that undermine the genuine nature of the investment.

• Shares lose their eligibility for deferral relief if arrangements exist, at or before the time of issue, for the subsequent repurchase, exchange, or disposal of the shares or other shares or securities in the same company.
• Eligibility is also lost where there are plans to cease any trade carried on by the company or a connected person, or to dispose of all or a substantial part of the company's assets or those of a connected person.
• Arrangements whose main purpose is to protect investors against the normal risks of investing — through insurance, indemnities, guarantees, or similar mechanisms — will also disqualify the shares from relief.
• Certain exceptions apply: share exchanges under paragraph 8 of the Schedule are permitted, winding-up provisions are acceptable unless pre-planned or not genuinely commercial, and normal business insurance taken out by the company or its trading group is not caught.