Written confirmation from HMRC before the shares are issued.

No. Clearance is optional. But without it, you carry the risk that HMRC later argues the anti-avoidance rule in section 137 TCGA 1992, or the transactions in securities rules in ITA 2007, applies to your share exchange. That could mean a capital gains tax or income tax charge years later. Clearance gives written confirmation in advance, so most advisers treat it as standard for a holding company insertion.

Capital gains tax and corporation tax, through one specific rule. It confirms that HMRC is satisfied the share exchange will be effected without arrangements to which section 137 TCGA 1992 applies. Since 26 November 2025, section 137 is a main purpose test: it applies where the arrangements have a main purpose of reducing or avoiding capital gains tax or corporation tax. A section 138 clearance only covers that rule. It has to be obtained before the holding company shares are issued.

Because the two cover different taxes. Section 138 deals only with capital gains tax and corporation tax under section 137. Section 701 ITA 2007 deals with the transactions in securities rules, which can tax a receipt as income where a main purpose is to obtain an income tax advantage. Inserting a holding company is a transaction in securities, and it isn't a fundamental change of ownership, so both clearances are usually sought together.

Yes. HMRC accepts a single application covering several statutory clearances, as long as it lists each provision applied for. Applications go to HMRC's Clearance and Counteraction Team, normally by email to reconstructions@hmrc.gov.uk. One combined application keeps the facts consistent and lets HMRC see the whole transaction at once, which is generally what it prefers.

A section 138 application is made by the acquiring company, the new holding company, or by the trading company whose shares are being acquired. A section 701 application is made by the person who will be party to the transaction, typically on behalf of the shareholders. In practice one combined application is submitted by the adviser, setting out who each clearance is sought for.

HMRC should reply within 30 days of receiving the application. If it needs more information, it must ask within those 30 days, and it then has 30 days from receiving the answers to give its decision. Most well-prepared applications are decided within the first 30 days. We plan the timetable around the possibility of one round of questions, so a year end or refinancing isn't put at risk.

In outline: the companies involved with their tax references and trading status, the shareholders and how they are connected, shareholdings before and after, each step in order with diagrams, the consideration and who receives it, the latest accounts, the commercial reasons for the transaction, and the provisions under which clearance is sought. Anything planned afterwards, such as a sale or a gift of shares, must also be disclosed.

Because the main purpose test looks at the arrangements as a whole, not just the share exchange. A planned sale, a buy-back, a demerger or a large dividend could change HMRC's view of why the holding company is being inserted. A clearance is void if material facts are not fully and accurately disclosed, so it is safer to explain future plans honestly than to leave them out.

If HMRC asks for further particulars and they aren't provided within 30 days, or any longer period HMRC allows, HMRC need not proceed with the application. That effectively leaves you without clearance. If the answers will take time, for example because accounts are being finalised, it's best to tell HMRC and agree an extension rather than let the deadline pass.

Only for the transaction as described in the application. If the steps change, the share numbers differ, or new arrangements are added, the clearance may not cover what was actually done. The transactions in securities clearance specifically does not prevent HMRC acting on a wider set of transactions that includes others. If the plan changes before completion, we update HMRC and seek a fresh or amended clearance.

Yes. Within 30 days of HMRC notifying a refusal, or of HMRC failing to decide within its time limit, you can require HMRC to send the application, with any further particulars, to the tax tribunal for a decision. There is no equivalent right for a section 701 transactions in securities clearance. In practice, answering HMRC's concerns or adjusting the steps is often quicker than going to the tribunal.

HMRC doesn't withdraw a clearance on a whim, but a clearance is void if the application did not fully and accurately disclose all the facts and considerations material to HMRC's decision. Both section 138 TCGA 1992 and section 702 ITA 2007 say so. That's why we take care to describe the commercial background, the shareholders and any future plans accurately, rather than writing the shortest possible letter.

No. Stamp duty share acquisition relief under section 77 of the Finance Act 1986 is not part of the statutory clearance procedure. The stock transfer forms are sent to HMRC's Stamp Taxes team for adjudication after the exchange, within 30 days of signing, with details of the relief claimed. Adjudication is compulsory to obtain the relief, and it is a separate step from the section 138 and section 701 clearances.

No. A section 138 or section 701 clearance only confirms that the specific anti-avoidance rules won't be applied to the transaction. It says nothing about business asset disposal relief, the substantial shareholding exemption, inheritance tax business relief, corporation tax, valuations or employment-related securities. Those positions depend on the facts at the time of a later sale or gift, and need to be checked separately.

When a company buy-back forms part of the plan, for example where a shareholder is leaving before the holding company is inserted and the trading company is buying their shares. Section 1044 CTA 2010 asks HMRC to confirm that capital treatment under section 1033 applies, so the seller is taxed on a capital gain rather than a distribution. Unlike section 138 and section 701, it has no statutory time limit for HMRC's reply.

Only if a statutory demerger is part of the plan, for example where a holding company structure is being used to split a trading business from a property business. Section 1091 CTA 2010 asks HMRC to confirm that a distribution will be an exempt distribution. A section 139 clearance may also be relevant where a business is being transferred between companies under a scheme of reconstruction. Both can go in the same combined application.

It's HMRC's written view on how the law applies where there's genuine uncertainty about a transaction. HMRC usually replies within 28 days. It isn't available where a statutory clearance covers the point, for tax planning or on questions of fact. Most holding company insertions don't need one, because sections 138 and 701 cover the main risks, but it can occasionally help on a separate point of interpretation.

You can, but you lose the point of applying. A section 138 clearance has to be obtained before the shares are issued, so issuing them early means the application can no longer protect the share exchange. That's why the share exchange agreement is usually made conditional on clearance, or simply signed once HMRC's letter arrives. If timing is tight, it's better to plan the application earlier than to complete without it.

Clearly mark it as market sensitive. HMRC asks for this where the information could affect a share price or concerns the financial affairs of well-known people, and gives those applications extra security handling. Email attachments should be no larger than 2MB and self-extracting zip files are blocked. Postal applications go to BAI Clearance, HMRC, BX9 1JL.