Shares and Securities (2)

Question 1

Why does a chargeable gain not arise on a “paper for paper” takeover?

Answer 1

As new shares acquired take the place of the original shares

Question 2

What is the cost of the original shares?

Answer 2

Becomes the cost of the new shares

Question 3

What if there is a cash element?

Answer 3

Represents a disposal for CGT purposes and the orginal cost needs to be apportioned between cash and new shares received

Question 4

What is a qualifying corporate bond (QCB)

Answer 4

A security which satisfies:

Represents a normal commercial loan

Expressed in £

Was acquired by eprson now disposing of it after 13 March 1984

Does not have a redemption value

Question 5

What is a normal commercial loan?

Answer 5

Excludes any bonds which are convertible into shares or carry ri`ght to excessive interest

Question 6

First thing that’s matched against acquisitions of shares?

Answer 6

Shares acquired on the same day

Question 7

Second thing that’s matched against acquisitions of shares?

Answer 7

Shares acquired within the 30 days following the sale

Question 8

Third thing that’s matched against acquisitions of shares?

Answer 8

Shares from the share pool

Question 9

First step in capital gain on disposal of shares?

Answer 9

Analyse using the three matching rules

Question 10

Calculate disposal on shares?

Answer 10

Proceeds - cost

Question 11

The matching rules?

Answer 11

Acquisition on same day
Acquisitions in next 30 days
Match with share pool

Question 12

Rights and bonus order?

Answer 12

Firstly rights. Then bonus

Question 13

If some cahs received at takeover

Answer 13

Capital gain arise and need to be calculated at takeover for the cash element received

Question 14

When answering takeover questions?

Answer 14

1. What did he have?
2. What did he get?