HM Revenue & Customs (HMRC) has announced changes to the capital gains tax (CGT) anti-avoidance rules that apply to share exchanges and company reorganisations, as part of the UK Government’s Budget 2025 measures. The updated rules are designed to strengthen the integrity of tax reliefs available on certain corporate transactions.
The revised legislation, which will take effect for share or debenture issues on or after 26 November 2025, expands the scope of the existing anti-avoidance provisions. Under the new framework, the rules will apply where arrangements have been entered into with the main purpose, or one of the main purposes, of securing a tax advantage. Previously, the focus was on the overarching purpose of the transaction as a whole, a test that HMRC officials and tax experts have said allowed some arrangements to avoid scrutiny under the old regime.
Unlike before, where transactions were assessed on whether they were carried out for bona fide commercial reasons, the updated rules zero in on targeted anti-avoidance. This shift is intended to better capture instances where tax benefits are engineered through additional arrangements embedded within broader commercial activity.
The changes also introduce transitional provisions for transactions where advance clearance applications were submitted to HMRC before the Budget announcement. In such cases, the previous anti-avoidance regime will continue to apply provided the shares or debentures are issued within a specified timeframe.
HMRC said the update aims to enhance trust in the UK tax system, ensuring that share reorganisation reliefs are not exploited in ways that were not originally intended. The move forms part of a wider suite of Budget 2025 tax measures designed to modernise anti-avoidance protections across the tax code