Taxation of Chargeable Gains Act 1992 Schedule 7AC paragraph 5

Circumstances in which exemptions do not apply

Section 5 is an anti-avoidance measure that denies the substantial shareholdings exemption where arrangements are designed to shelter untaxed gains through an otherwise exempt disposal of shares.

• The exemption is denied where a company (Company A) makes an untaxed gain on disposing of shares, an interest in shares, or a share-related asset in another company (Company B), and arrangements exist whose sole or main benefit would be obtaining the exemption.
• A gain is considered "untaxed" if the gain, or all but an insubstantial part of it, represents profits that have not been brought into account for tax purposes anywhere in the world for a period ending on or before the disposal date.
• Before the gain accrued, either Company A must have acquired control of Company B, or the same person or persons must have acquired control of both companies, or there must have been a significant change of trading activities affecting Company B while under common control with Company A.
• A significant change of trading activities includes a major change in the nature, conduct, or scale of a trade carried on by Company B or its 51% subsidiaries, or Company B or such a subsidiary beginning to carry on a trade.