When one company is taken over by another, the buying company may issue their existing shares and/or other assets as payment or a part-payment for the shares of the company that it is buying. This is sometimes regarded as share reorganisation.

Under certain conditions within the trading of old shares for new shares, no capital gains will be realised until the new shares are sold. In relation to Capital Gains Tax (CGT), the sale of the old shares and the acquisition of the new shares are treated as though happening at the same time and at the same value meaning that no Capital Gains will be realised.

When looking at cash payments made for shares in the situation of a takeover, the money received is counted as being subject to Capital Gains Tax as normal. Exceptions to this rule include a situation wherein the amount of cash used in this payment is ‘small’ relative to the value of the shares being bought immediately before the takeover occurs as part of the overall transaction. Cash figures are considered as ‘small’ when the overall value is less than £3,000 or when the cash price is paid as 5% or less of the original value of the shares in the company being purchased immediately before the takeover.