[HMRC Tax Bulletin 6, February 1993]

Under Section 116 TCGA 1992 the normal share reorganisation rules of Sections 127–130 TCGA 1992 do not apply if qualifying corporate bonds are issued in exchange for shares. Instead Section 116(10) requires the computation of the gain that would have arisen if the shares had been sold at their market value at the date of reorganisation. The gain is deferred and crystallises on a later disposal of the qualifying corporate bonds. Where only part of the holding of qualifying corporate bonds is disposed of only a corresponding part of the deferred gain crystallises.

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