Autumn Statement 2022 has been accompanied by a policy paper proposing changes to the share-for-share exchange provisions to treat non-UK companies as UK companies where certain conditions are met.

UK Resident Non-Domiciled individuals claiming the Remittance Basis of Taxation had been able to use the Share-for-Share exchange provisions to insert a non-UK holding company above a UK business tax-free and to avoid UK tax on unremitted income and gains arising from that UK business.

Such structuring, prior to 17 November 2022, could cause any income or gains from the new holding company to be treated as of non-UK source, meaning a non-dom on the remittance basis would avoid UK tax provided the funds remained outside the UK.

The proposed provisions will prevent this avoidance by:

  • Deeming a non-UK incorporated company who acquired a UK company in exchance for issuing shares in itself as located in the UK for Capital Gains Tax (CGT) purposes.
  • Deeming income from that non-UK company as UK income.

The provisions will apply where:

  • The UK company is a Close Company.
  • The individual has a material interest and is a participator in that company.
  • The non-UK company would be a close company if it were a UK company.
  • The individual has a material interest and is a participator in the non-UK company following the share exchange.

An individual has a material interest if they, an associate, or in combination with an associate have more than 5% of the ordinary share capital of the company, or would be entitiled to more than 5% of the distributable assets on a winding up.

An election can be made to disapply the share for share rules, which would lead to a chargeable gain arising on the insertion of the non-UK holding company. If the election is made the proposed anti-avoidance provisions will not apply.

Other guides on this topic

An Index to Reorganisaitons, Demergers & Share transactions
What is a company reorganisation or reconstruction? What tax reliefs apply to a company reorganisation, a share for share exchange, reconstruction or other transaction involving shares?

Case Study 7: Creating a group by share for share exchange
What are the steps for creating a group by way of a share for share exchange? 

 Non-domicile status, deemed domicile & tax
Who is non-UK domiciled? What does this mean for UK Income Tax, Capital Gains Tax and Inheritance Tax? What reliefs are available to non-doms?

Domicile and the remittance basis: At a glance
What is domicile? What is the remittance basis and when does it apply?

Remittance basis (overseas income)
What is the remittance basis? Who can claim it and when? What are the advantages of claiming the remittance basis and how much is the remittance basis charge?

SRT: Statutory Residence Test
What is the statutory residency test? Why is it important and how does it work?

External Links

Capital Gains Tax Share Exchange policy paper

Draft legislation

Autumn Statement 2022 


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