Taxation of Chargeable Gains Act 1992, section 135

Exchange of securities for those in another company

Part IV Shares, securities, options etc.

(1) This section applies in the following circumstances where a company (“company B”) issues shares or debentures to a person in exchange for shares in or debentures of another company (“company A”).

(2)The circumstances are:

(3)Where this section applies, sections 127 to 131 (share reorganisations etc) apply with the necessary adaptations as if company A and company B were the same company and the exchange were a reorganisation of its share capital.

(4) In this section “ordinary share capital” has the meaning given by [F714 section 1119 of CTA 2010 F714] and also includes—

(a)in relation to a unit trust scheme, any rights that are treated by section 99(1)(b) of this Act (application of Act to unit trust schemes) as shares in a company, and

(b)in relation to a company that has no share capital, any interests in the company possessed by members of the company.

(5)This section applies in relation to a company that has no share capital as if references to shares in or debentures of the company included any interests in the company possessed by members of the company.

(6)This section has effect subject to [F715 section 137 (anti-avoidance)F715] .F713]

Definitions used in section 135 10

company

“company” includes any body corporate or unincorporated association but does not include a partnership, and shall be construed in accordance with section 99 ;

Defined in s.288(1) · see it in the full Act

(5) In this paragraph “company” and “group” shall be construed in accordance with section 170(2) to (9).

Defined in Sch.2 para.5(5) · see it in the full Act
shares

“shares” includes stock;

Defined in s.288(1) · see it in the full Act

(5) In this paragraph, except in paragraphs (a) to (c) of sub-paragraph (6), “shares” includes an interest in shares.

Defined in Sch.7AC para.10(5) · see it in the full Act

(b) “shares” includes securities,

Defined in Sch.7 para.4(2) · see it in the full Act
the shares

(5) In sub-paragraphs (3) and (4) and in the following provisions of this Schedule references to “the shares” are to the shares referred to in sub-paragraph (1)(a).

Defined in Sch.7ZB para.1(5) · see it in the full Act

(a) references to “the shares” shall be construed in accordance with sub-paragraph (1) above, and

Defined in Sch.5B para.13(12) · see it in the full Act
company B

(c) the disposal by company A is to a person who is connected with another company (“company B”) which at some time after 19th March 1985 disposed of the asset by way of an inter-group transfer, and

Defined in s.19(6) · see it in the full Act
ordinary share capital

8 (1) In this Schedule “ordinary share capital” has the meaning given by section 1119 of CTA 2010 and also includes—

(a) in relation to a unit trust scheme, any rights that are treated by section 99(1)(b) of this Act (application of Act to unit trust schemes) as shares in a company, and

(b) in relation to a company that has no share capital, any interests in the company possessed by members of the company.

Defined in Sch.5AA para.8(1) · see it in the full Act
company A

(3) Where sub-paragraph (1) applies to extend the period for which a company (“company A”) is treated as having held any shares, that company shall be treated for the purposes of this Part as having had at any time the same entitlement—

(a) to shares, and

(b) to any rights enjoyed by virtue of holding shares,

Defined in Sch.7AC para.10(3) · see it in the full Act

(a) a company (“company A”) disposes of an asset by way of a material transaction, and

Defined in s.19(6) · see it in the full Act
class

“class”, in relation to shares or securities, means a class of shares or securities of any one company;

Defined in s.288(1) · see it in the full Act
connected

(4) Section 1122 of CTA 2010 (meaning of “connected” persons) applies for the purposes of sub-paragraph (1A)(a).

Defined in Sch.7AC para.19(4) · see it in the full Act
control

Section 1124 of CTA 2010 (meaning of “control") applies for the purposes of this sub-paragraph.

Defined in Sch.5AA para.4(3) · see it in the full Act

(d) for the purposes of any attribution under section 451(4) (rights of a person's associates to be attributed to the person etc in determining “control”) the rights and powers of a person (“A”) are not to be attributed to another person (“P”) merely because A is a partner of P , and

Defined in Sch.5AAA para.46(2) · see it in the full Act

“control” shall be construed in accordance with sections 450 and 451 of CTA 2010 ;

Defined in s.288(1) · see it in the full Act
CTA 2010

“CTA 2010” means the Corporation Tax Act 2010 ;

Defined in s.288(1) · see it in the full Act

Cases considering section 135 9

Delinian Limited v The Commissioners for HMRC

[2023] EWCA Civ 1281 · 3 November 2023Limits

The judgment treats section 135 as the statutory share-exchange mechanism to which the section 137 restriction applies. The provision supplied the basis for the claimed tax deferral. (see paras [20]-[24]; [49]-[50]) Cited only. Cited only. The judgment confirms that sections 127 to 131 apply with necessary adaptations to a qualifying exchange. (see paras [23]; [49]) The judgment confirms that section 135 operates subject to the section 137(1) restriction. (see paras [23]-[24])

Mehjoo v Harben Barker (A Firm) & Anor

[2013] EWHC 1500 (QB) · 5 June 2013

Applies the no-disposal treatment to qualifying exchanges of shares or debentures. The court considered its interaction with section 137 and concluded that the proposed planning would not have adversely affected the co-shareholder’s tax position. (see paras [430]–[450])

Snell v HM Revenue & Customs

[2006] EWHC 3350 (Ch) · 21 December 2006Interprets

Interpreted as part of the statutory scheme treating qualifying securities exchanges as eligible for tax deferral, subject to section 137. The court held that the anti-avoidance condition could withdraw that deferral where the arrangements were intended to avoid liability altogether (see paras [11]-[12]; [35]-[38]).

What each judgment says about section 135 is in the case-law panel in the full Act.

Amendments and notes

7 notes from legislation.gov.uk

Amendments

  1. F713S. 135 substituted (with effect in accordance with Sch. 9 paras. 7, 8 of the amending Act) by Finance Act 2002 (c. 23), Sch. 9 para. 1
  2. F714Words in s. 135(4) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 234 (with Sch. 2)
  3. F715Words in s. 135(6) substituted (with effect in accordance with s. 37(6) of the amending Act) by Finance Act 2026 (c. 11), s. 37(2)(6) (with s. 37(7))

Modifications

  1. C226Ss. 135, 136 excluded (with effect in accordance with s. 63(4) of the amending Act) by Finance Act 2000 (c. 17), Sch. 15 para. 82 (with s. 84)
  2. C227Ss. 135, 136 excluded by Income and Corporation Taxes Act 1988 (c. 1), s. 757 (as amended (with effect in accordance with Sch. 9 paras. 7, 8 of the amending Act) by Finance Act 2002 (c. 23), Sch. 9 para. 4(5))
  3. C228S. 135 restricted by The Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964), reg. 85X (as inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by S.I. 2010/294, regs. 1(1), 21)
  4. C229S. 135 excluded by Offshore Funds (Tax) Regulation 2009 (S.I. 2009/3001), reg. 36A(2)(c) (as substituted (8.6.2013) by S.I. 2013/1400, regs. 1(1), 15(a) (with reg. 1(2)))