There is a relief from any income tax liability arising on an exchange of restricted securities (or a restricted interest in securities)1. Whilst the concept is simple enough, the relief is carefully worded to exclude avoidance devices and to ensure that a potential liability cannot be washed out through the exchange (see below). Other complications are the need to accommodate consideration only partly in the form of new securities, and to provide for subsequent exchanges.
Operation of the relief
The application of the relief depends on four conditions being met2:
- Ìý
•ÌýÌýÌýÌý an associated person (see E4.507A) disposes of restricted securities (or a restricted interest in securities) other than to another associated person for consideration (ie a disposal of the old securities)
- Ìý
•ÌýÌýÌýÌý the whole, or part of, that consideration consists of, or includes, other restricted securities being acquired by an associated person (ie not necessarily the person disposing of the old securities)
- Ìý
•ÌýÌýÌýÌý the value of that consideration (ie the unrestricted value of the new securities plus
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