Reforms to the scrip for scrip roll‑over

On 14 December 2013, the Government announced it would proceed with amendments first announced in May 2012 to tighten the scrip for scrip roll-over rules. The intention is to make it harder for companies and trusts to avoid capital gains tax when they sell subsidiary companies other than as part of a genuine merger or restructure of their business.

The proposed amendments:

• expand the significant and common stakeholder tests to include any entitlements that interest holders have to acquire additional rights;
• provide that a capital gain arising on the settlement of a debt owed by an acquiring entity to its parent company as part of the scrip for scrip acquisition is no longer disregarded;
• extend the application of the cost base allocation rules regardless of whether the interest is issued to the group’s parent company or to another member of the group;
• introduce a new condition on the availability of scrip for scrip roll-over relief in downstream acquisitions; and
• extend the application of the restructure provisions to trusts restructures.