CGT: WHAT CHANGED FOR SHARE EXCHANGES AND REORGANISATIONS AT BUDGET 2025

Introduction

The 2025 Budget introduced significant changes to how the UK treats “paper-for-paper” transfers: share exchanges and company reorganisations. Previously, many of these transactions could benefit from rollover relief under the reorganisation rules in TCGA, allowing shareholders to swap or reorganise share capital without triggering an immediate Capital Gains Tax (CGT) charge. From 26 November 2025, however, the government has expanded the anti-avoidance carve-outs so that such rollover relief may be denied where the main purpose of the exchange or reorganisation is (or includes) securing a tax advantage. For shareholders, founder-owners, corporate groups and advisers, that means greater risk, tighter scrutiny, and a need for more robust commercial substance when planning share-for-share exchanges and reconstructions.

What’s changing - the new anti-avoidance regime

According to the government’s published note:

• The revised anti-avoidance provisions apply to any issue of shares or debentures on or after 26 November 2025. 
• Under the old regime (TCGA sections 127–139), share exchanges and share capital reorganisations qualified for CGT rollover relief (no immediate gain) so long as conditions were met and no avoidance motive was identified. 
• Under the new rules, HMRC may deny rollover relief where the transaction (or any part of it) has as its main purpose, or one of its main purposes, obtaining a tax advantage. 
• If relief is denied, the transaction is treated as a disposal at market value (or relevant disposal value), meaning CGT (or corporation tax, where applicable) becomes immediately due. 
• The government’s stated aim is to strengthen trust in the tax system and prevent “arrangements whose main or one of the main purposes is to secure a tax advantage” from abusing the reorganisation reliefs. 

Importantly: if a clearance application under the old-law procedure (e.g. s.138 clearance) was submitted to HMRC before 26 November 2025, and the relevant shares/debentures issued within the transitional window (60 days), then the pre-existing (old) anti-avoidance regime continues to apply.

Who will be affected?

This change potentially impacts a wide variety of taxpayers and companies, including:

• Founders and shareholders carrying out share-for-share exchanges (for example, to adjust shareholdings, reorganise group structure, or facilitate investment)
• Groups carrying out corporate reorganisations or reconstructions, including transfers within holding structures, merger-type reorganisations, or share-for-debt swaps
• Owner-managed businesses and private-equity backed companies that frequently restructure for commercial or financing reasons
• Trustees, beneficiaries, and advisers involved in company restructurings, share plans, or group reorganisations under rollover relief

Some other takeaways / concerns

• The change turns rollover relief into a substance-over-form test: transactions will now need genuine commercial purpose and structure, not merely formal compliance, if rollover is to survive. 
• For companies considering restructuring via share exchanges or reorganisations, simply meeting the old statutory tests will likely no longer suffice.
• The removal of the old de minimis “notional avoidance” threshold (under the old anti-avoidance rule, small-shareholders might have escaped denial) means even minor or minority stakeholders may lose rollover relief if the overall scheme is caught. 
• For private equity, mid-market deals, family groups and restructurings, 
• compliance burden and risk of surprise tax liabilities have increased, which may dampen some transactions or at least re-shape structuring decisions. 

Practical Planning Implications - What You Should Be Doing

Given the change, here are important practical and planning points for you (or your clients) to consider:

• Reassess planned share exchanges or reorganisations scheduled for 2026/2027 onward: Make sure they satisfy the new provisions.
• Document commercial purpose carefully: board minutes, internal business rationale, strategy papers, financing or operational logic (not just tax), to evidence “main purpose” other than tax.
• Review shareholder structures: small shareholders or minority stakeholders need to be aware that, even if individually they hold only a small stake, rollover can be denied if the wider group or transaction is regarded as tax-avoidance.
• Update advice letters, engagement terms and “deal checklists”: advisers should alert clients to the revised CGT risk and include commercial rationale documentation as standard.

Conclusion

The modernisation of the anti-avoidance provisions applying to share exchanges and reorganisations marks a significant tightening of the CGT regime. What was frequently a tax-neutral and administratively convenient route to reorganise share capital may now carry additional CGT risk, unless robust commercial substance can be demonstrated.

If you or your clients have any planned reorganisations, share exchanges or restructuring in the near future and would like to run through the likely CGT implications under the new regime, do feel free to get in touch via our contact page below.