Taxation of Chargeable Gains Act 1992 Schedule 7AC paragraph 25

Effect in relation to company invested in of earlier company reconstruction, demerger etc

Section 25 ensures that rules dealing with earlier company reconstructions and demergers also apply when assessing whether the company being invested in meets the required conditions, not just when testing the substantial shareholding requirement.

• The rules that apply to company reconstructions (share exchanges under sections 135 or 136) and demergers (under section 192) are extended to cover the requirements relating to the company invested in.
• These rules already apply when testing the substantial shareholding requirement; this paragraph ensures they apply equally when assessing the investee company's qualifying status.
• Where a reconstruction or demerger has occurred during the relevant period, the activities of both the predecessor and successor companies must be taken into account when evaluating the investee company.
• The effect is that a corporate reorganisation or demerger does not inadvertently disqualify the investee company from meeting the conditions needed for the substantial shareholding exemption to apply.