UK and International Tax news

Budget 2025 Changes to Share Exchange and Reorganisation Anti Avoidance Rules

Friday 5th December 2025

HMRC have announced amendments to anti avoidance rules for share exchanges and company reorganisations with effect from 26 November 2025.

The new measures make changes to the capital gains avoidance rules that apply to share exchanges and company reconstructions. It amends the existing avoidance rules by ensuring that they apply to those persons who have entered into arrangements where the main purpose, or one of the main purposes, of the arrangement is to secure a tax advantage that they would not ordinarily have been entitled to.

The capital gains share reorganisation rules contained in s.127 to s.139 TCGA92 apply where a company’s share capital is reorganised and are extended to where shares are issued to a person in exchange for shares in another company or its share capital is reconstructed. These are usually ‘paper for paper’ transactions where no cash has been paid. In such transactions the reorganisation rules provide that there is no immediate charge to capital gains tax or corporation tax on the shareholders. Instead, any gain is rolled over into the new shares. This avoids dry tax charges and ensures that tax is not an obstacle to such transactions, which are usually made for good commercial reasons.

The reorganisation provisions are however subject to avoidance rules found in s.137(1), s.139(5) and s.103K(1) TCGA92.  A clearance procedure per s.138 TCGA92 is available, is optional, not a requirement for rollover relief, but it is generally considered to be prudent for most reorganisations.

Transitional provisions are to be introduced to apply for clearances sought before 26 November and transactions implemented before 26 January 2026 so as to benefit under the previous rule. If implementation is delayed, a fresh clearance is likely to be needed.

Legislation will be introduced in in Finance Bill 2025-26 amending the current anti-avoidance provisions that apply to reorganisations, so that they will apply to those cases where a person has entered into arrangements where the main purpose, or one of the main purposes, of those arrangements was to secure them a tax advantage. The reorganisation provisions will then apply to those persons who did not benefit from the avoidance.

HMRC consider the proposed changes will better target those cases where, as part of a commercial exchange or company reconstruction, additional arrangements have been put in place to obtain a tax advantage.

Given the above proposals, it will be important to review not only the draft legislation but also HMRC guidance particularly in relation to common transactions.

If you would like more details on the above measure, please contact Keith Rushen on 0207 486 2378.

 

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