Recent changes to UK tax clearance for restructuring

HMRC's clearance regime provides taxpayers with comfort that certain anti-avoidance rules will not apply to proposed transactions before they are implemented. Common transactions include share-for-share exchanges, holding company insertions, company reconstructions, demergers, and transactions in securities matters.

A significant change was announced in the UK Budget 2025 and included in the Finance Bill 2025–26. The reforms affect the anti-avoidance rules applying to share exchanges, company reconstructions, and certain business transfers under the Taxation of Chargeable Gains Act 1992.

Historically, relief was generally available where a transaction was undertaken for bona fide commercial reasons and did not form part of arrangements with a main purpose of avoiding tax. One of the most important reforms removes the explicit "bona fide commercial reasons" test. Instead, the legislation focuses more directly on whether securing a tax advantage is a main purpose, or one of the main purposes, of the arrangements. Commercial restructurings should still qualify for relief, but the commercial rationale is likely to receive closer scrutiny.

The reforms also remove the longstanding 5% shareholder exemption. Previously, minority shareholders holding 5% or less were generally outside the scope of the anti-avoidance rules. Following the changes, all shareholders may potentially be affected.

Another notable development is the introduction of a "just and reasonable" counteraction power. Rather than denying relief entirely, HMRC can now make targeted adjustments to counteract only the identified tax advantage. While this may produce a more proportionate outcome, it also introduces greater uncertainty over how the rules will be applied in practice.

These changes increase the importance of well-prepared clearance applications. HMRC expects full disclosure of the transaction, the parties involved, and, importantly, the commercial reasons for the restructuring. Incomplete disclosure may invalidate any clearance obtained.

Although the clearance regime remains a valuable tool for providing certainty, businesses contemplating restructurings should expect greater scrutiny, and ensure that commercial objectives are clearly documented before seeking HMRC clearance.

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Andrew Neuman is a Tax Partner with over 20 years' experience advising large corporations, both domestic and overseas, owner-managed businesses, and private individuals on all areas of taxation. Andrew specialises in international tax issues, helping clients to structure activities in a tax-efficient way.