James Stewart writes for Tax Journal on changes to the share exchanges and reorganisation rules in the 2025 Budget

An unexpected Budget change has rewritten the anti-avoidance rule for share exchanges.

Buried in the fine print of the Budget documents, and without any apparent leaks or prior consultation, HMRC have amended the anti-avoidance rules for share exchanges and company reorganisations with immediate effect.

Although the legislation in currently in draft, once enacted it will apply to transactions taking place on or after 26 November 2025.

James Stewart, Partner in our Corporate Tax and Incentives team, explores the new rules, what has changed and why it matters, in an article for Tax Journal. James explains:

In summary, it is clear the revised legislation is potentially wider than its predecessor in catching tax avoidance or reduction arrangements, even when they are part of a larger genuinely commercial transaction. It follows there could be increased uncertainty on how the rules apply when approaching all but the most vanilla of transactions.

What we recommend: Whilst s 138 clearances have always been the prudent approach, HMRC’s change to the longstanding anti-avoidance rule means it is as important as ever to obtain advance tax clearance – particularly until there is greater clarity on how HMRC intends to apply the revised rule to common transactions such as the use of loan notes in private equity transactions.

The need for tax clearances should be budgeted into transaction timetables from an early stage.

Transactions which have not yet taken place, but for which s 138 clearance has been obtained or was requested before Budget day, will need to adhere to the 60 day rule or face having to be re-evaluated against the new legislation. 

Read the full article in Tax Journal here.