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If the consideration for the new holding is only partly shares or debentures, with the other part being, for example, cash, a corresponding proportion of the original shares or debentures will be treated as disposed of for the cash¹, with the cash received being treated as a capital distribution in respect of the original shares².

A capital distribution constitutes a part disposal, unless the amount received is 'small' (see below).

Consequently, the normal part disposal rules³ apply (see Division C2.4), meaning that the cost of acquisition of the part disposal is:

where:

1. Ìý

   ÌýÌýÌýÌý A is the consideration received

2. Ìý

   ÌýÌýÌýÌý B is the value of the new holding after the disposal, and

3. Ìý

   ÌýÌýÌýÌý C is the allowable cost of the original holding

Example 1

H purchased 12,000 shares in J plc in May 2013 for £24,000. In 2018, L plc makes a takeover bid for J plc, offering 3 of its own shares for every 2 shares in J plc,