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Section 103I Taxation of Chargeable Gains Act 1992 (鈥渟ection 103I鈥�)

This section applies to schemes of reconstruction where investors have exercised their rights under regulation 12(1)(b) of The Undertakings for Collective Investment in Transferable Securities Regulations 2011 (鈥淩egulation 12(1)(b)鈥�).

Regulation 12(1)(b) applies where one collective investment scheme (the merging scheme) is being merged into another scheme (the receiving scheme). Investors in either scheme may require that their units be exchanged for units in a third scheme which has similar policies to the merging or receiving scheme and is managed by the same or an associated manager. Section 103I refers to that third scheme as 鈥渢he conversion scheme鈥�. In section 103I the term 鈥渟cheme C鈥� can refer to the merging scheme 鈥楢鈥� or the receiving scheme 鈥楤鈥�.

Accordingly, an investor in scheme 鈥楢鈥� that does not want to exchange their 鈥楢鈥� units for units in scheme 鈥楤鈥� may instead require their 鈥楢鈥� units to be exchanged for units in a conversion scheme. On the other hand, an investor in scheme 鈥楤鈥� that does not want to take part in the scheme of reconstruction with scheme 鈥楢鈥� may instead require their 鈥楤鈥� units to be exchanged for units in a conversion scheme.

Under section 103I, where investors in scheme C ie investors in either scheme 鈥楢鈥� or 鈥楤鈥� exercise their right to exchange their units for units in the conversion scheme, chargeable gains rules apply as if scheme C and the conversion scheme were a single company which had reorganised its share capital - see CG51700C. In summary, the exchange of units in either 鈥楢鈥� or 鈥楤鈥� is treated as not a disposal for chargeable gains purposes and the new units are treated as having been acquired at the same time as the 鈥楢鈥� or 鈥楤鈥� units.

Section 103H only applies where the arrangements take place for bona fide commercial reasons and not for the avoidance of tax鈥� see IFM16260.