Tucked away in the Budget’s fine print was an announcement that HMRC is changing the anti-avoidance rules for share exchanges and group reorganisations, effective immediately. The legislation is currently in draft and will apply to transactions on or after 26 November 2025 once enacted.
Under the old rules, HMRC could deny share-for-share treatment if a transaction formed part of a scheme where the main purpose - or one of the main purposes - was to avoid capital gains tax or corporation tax, or if it was not carried out for “bona fide” commercial reasons.
The new rules focus solely in respect of arrangements relating to a transaction if the main purpose, or one of the main purposes of the arrangements, is to reduce or avoid capital gains tax or corporation tax. The requirement for “bona fide commercial reasons” has also been removed entirely.
Shareholders considering a group reorganisation should therefore be aware of the following:
• The concept of “arrangements” is broad, allowing HMRC to challenge tax avoidance even if it represents only a small part of a larger, commercially driven transaction. Additionally, the wording has been expanded to include any avoidance or reduction of tax, rather than just tax avoidance in isolation.
• HMRC may now respond proportionally by making “adjustments as are just and reasonable,” including partially disapplying rollover relief, rather than denying relief entirely. Guidance on how this will work in practice is still awaited.
• The previous “de minimis” protection for minority shareholders (less than 5% of a share or loan note class) has been removed, meaning small shareholders can no longer rely on this safeguard without a section 138 clearance.
Overall, the revised legislation is now much wider in catching arrangements with a tax reduction motive, creating increased uncertainty. As such obtaining section 138 advance clearance remains the prudent approach, particularly until there is greater clarity on how the revised rules will be applied to more common arrangements.
Navigating the recent UK Budget's share re-organisation rules requires expert guidance to ensure both compliance and optimal structuring. Sanctuary’s Advisory team, with its extensive UK tax experience specialises in deciphering these complex regulatory changes. Whether you are restructuring for succession planning, facilitating a future exit, or simply bringing order to your corporate affairs, we can work alongside you and your existing advisers to develop future-proof structures. Don't let the new rules lead to unintended tax liabilities; secure informed guidance on your corporate restructuring and UK tax needs by contacting us today via the contact form or emailing us at hello@sanctuary.ae.
For UK businesses considering opportunities in Saudi Arabia, the following steps outline the overall process:
1. Business Activity: Determine the appropriate business activity which will aligns with your business and satisfies all undertakings you will engage with in the Kingdom.
2. Local Partnerships: Consider any potential opportunities for collaborations with established local businesses to ease market entry and meet regulatory requirements.
3. Documentation: Gather the required documentation for incorporation in KSA.
4. Company Registration: Work with experts and the relevant governing bodies to assist with the incorporation process, ensuring compliance with local laws and regulations.
5. Other Requirements: Consider any other requirements for establishing in Saudi Arabia such as capital and tax requirements.
Saudi Arabia's Vision 2030 represents a significant opportunity for UK businesses to engage with an expanding market with vast potential. As the Kingdom continues to diversify its economy and expand its global influence, UK companies are well-positioned to support and benefit from this transformation. With the right strategy, partnerships, and local support, there are a wealth of possibilities.
By aligning your business with Saudi Arabia’s Vision 2030, the benefits for UK and international businesses looking to Saudi Arabia have never been greater.
At Sanctuary, we specialise in assisting businesses looking to expand into Saudi Arabia. We help navigate the complexities of the Saudi market, ensuring that you have the expertise needed to best prepare for success, so get in touch today.
Our expert team offers comprehensive support across a range of services, from company registration, advisory services, and more. Explore our services to discover how we can help you.
Vision 2030 is a strategic framework designed to diversify Saudi Arabia’s economy, reduce its dependency on oil, and transform the Kingdom into a global business hub.
Key points include economic diversification, social reforms, investment in technology and infrastructure, sustainability, and creating a competitive workforce.
The main focus of the Saudi Arabian Vision 2030 strategy is to build on key economic sectors such as hospitality, travel and tourism and build economic stability and sustainability.
Saudi Arabia’s Vision 2030 initiative is aimed at diversifying its economy through strategic investments into the non-oil sector and ensuring a more sustainable economic future.
Saudi Arabia has committed over $500 billion to Vision 2030, funding projects that span a variety of sectors, including energy, tourism, and infrastructure.
Yes, with its growing economy, reform initiatives, and investment incentives, Saudi Arabia is a highly attractive destination for foreign businesses seeking growth opportunities.
Key growing industries include renewable energy, tourism, healthcare, technology, and education.
Saudi Arabia permits foreign owned businesses and investment into the Kingdom, which has been elevated by the Vision 2030 initiative. A MISA licence is required for foreign investors or businesses to establish.
As a result of the diversification efforts of Saudi Vision 2030, the non-oil and private sector in the Kingdom have witnessed unprecedented growth in the past few years. The private sector continues to grow each quarter and the non-oil sectors continue to reach record contributions for the Kingdom’s GDP.
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