Taxation of Chargeable Gains Act 1992 section 103G

Exchange of units for those in another collective investment scheme

Section 103G provides capital gains tax relief when investors exchange their units in one collective investment scheme for units in another collective investment scheme, by treating the exchange as if it were a share reorganisation rather than a disposal.

• The section applies in two cases: a general offer to acquire more than 50% of a scheme's capital and income (Case 1), or an arrangement where 85% or more of the acquiring scheme's property ends up consisting of units in the original scheme (Case 2).
• Where the section applies, the exchange is treated as a share reorganisation, meaning that investors are not treated as having made a disposal for capital gains tax purposes at the time of the exchange — instead, the new units step into the shoes of the old ones.
• The original base cost of the old units carries over to the new units, so any capital gain or loss is deferred until the new units are eventually sold.
• The relief only applies if the exchange is carried out for genuine commercial reasons and does not form part of a tax avoidance arrangement.