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Purchaser tax position on a share deal

The implications for a purchaser following a 'share' deal are as follows:

1. Ìý

   (a)ÌýÌýÌýÌý the purchase price of the Target share capital will be Newco's base cost for a future capital gains disposal¹. However, if the substantial shareholding exemption applies², any gain will, in any case, be exempt from tax

2. Ìý

   (b)ÌýÌýÌýÌý the purchasers will take on the historic tax attributes of Target. It should, however, be borne in mind that:

3. 1. Ìý

      (1)ÌýÌýÌýÌý losses brought forward may be restricted in certain circumstances (D1.1125)³

   2. Ìý

      (2)ÌýÌýÌýÌý relief may not be available at all for losses carried forward (D1.1106, D1.1108)⁴, as HMRC could argue that there is a different trade to the one that generated the losses, and

   3. Ìý

      (3)ÌýÌýÌýÌý capital losses brought forward may also be restricted on the change of ownership (Division D2.4)⁵

A 'share' deal could bring