CFM62950 – Corporate Finance Manual – HMRC Internal Manual

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EGLBAGL (SI 2002/1970) REG 3 and 5

Where there has been a disposal of shares by a company for which amounts have been disregarded by the company under REG 5ZA, the disregarded amounts may be taken into account when disposing of the shares. These will be the shares subscribed to if hedged under REG 5ZA(2)(a)(iii) (see CFM62920).

It is expected that in many cases the Substantial Interest Exemption (TCGA92/SCH7AC) or QAHC rules (FA22/SCH2/PARA14) will apply to the taxable gain or deductible loss on disposal, in which case adjustments that arise under the EGLBAGL Regulations are also outside the scope of the tax.

EGLBAGL REG 5(3A) and (3B)

Where the relevant hedging relationship under REG 5ZA concerned a relevant dividend or creditor relationship, there are special rules in the EGLBAGL Regulation.

Amounts relating to the coverage of a relevant dividend will not be taken into account under the EGLBAGL regulations, except to the extent that the dividend is reflected in the calculation of taxable gains under the rules on taxable gains for the transfer value (TCGA/S31) or depreciation. transactions (TCGA92/S176).

Amounts relating to coverage of a creditor relationship will also not be taken into account.

Share transactions that don’t complete

If a derivative contract is entered into to hedge the economic risk associated with an anticipated transaction or a firm commitment to an anticipated future transfer of shares, and the proposed transfer fails, any relevant amount resulting from the derivative contract should still be disregarded. under REG 5ZA. During a possible transfer of these shares, the amounts not taken into account will have to be taken back, except exemptions.

Any amount overlooked in connection with a planned share acquisition that does not materialize does not need to be reflected because the company with the relevant hedging relationship will not hold the shares and will not will never give in.

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