This is something I've been wondering about for some time now, and I think it's best if I explain my question through an example (I'm going to make this example hypothetical and very extreme just to make my point):

  • Suppose I buy 10 shares in company X for £10 each (making my total investment £100)
  • The shares of company X go up in value to £12 each the next day
  • The company X is acquired by company Y the day after
  • My 10 shares of company X are now replaced with 20 shares of company Y, each with a market value of £10

What would be the cost basis of a single one of these shares from company Y? It would be my assumption that it should be £5 (the total cost basis of the original shares from company X (£100) divided by the number of shares received in company Y (20))

Is this correct? I would really appreciate insight into a situation like this

1 Answer 1


Your assumption would be correct. See this article that talks about taxation of corporate events in the UK, and specifically discusses the scenario you're describing:

For tax purposes, where a target shareholder exchanges its shares for new shares as part of an acquisition, the shareholder is not treated as having made a disposal of the old holding for the purposes of capital gains tax provided certain conditions are met (share-for-share exchange relief). Instead, the shareholder is treated as having acquired the new holding at the same time, and for the same consideration, as the old holding.

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