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HMRC internal manual

Company Taxation Manual

Particular topics: transactions in securities: Introduction

Legislation to counter advantages obtained through transactions in securities dates back to 1960 – FA60/S28.  At that time capital gains were not liable to tax and the provision was aimed at income tax avoidance by conversion into capital gains.

The legislation continued to be relevant after the introduction of CGT as the various reliefs and exemptions, and usually lower CGT rates, made it attractive for taxpayers to undertake transactions by which they would receive capital rather than income.

The current legislation is at ITA07/PART13/CHAPTER1, S682 to S713, as amended by FA10/SCH12.  It applies where

  • a person is a party to a transaction, or transactions, in securities (see CTM36810),
  • the circumstances are

    • covered by ITA07/S685, and are
    • not excluded by ITA07/S686 (see CTM36830),
  • the main purpose, or one of the main purposes, of the person being a party to the transaction or one of the transactions in securities is to obtain an income tax advantage (see CTM36815), and
  • the person obtains an income tax advantage in consequence of the transaction or the combined effect of the transactions.

Similar legislation at CTA10/PART15 applies for the counteraction of corporation tax advantages obtained through transactions in securities – see CTM36835.

All decisions on invoking this legislation are taken by Clearance & Counteraction Team – see Tax Bulletin 46D of April 2000.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

The legislation is not within the ITSA or CTSA enquiry regimes.