Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Savings and Investment Manual

HM Revenue & Customs
, see all updates

Disguised interest: excluded shares

There is an exemption from the provisions of ITTOIA05/S381A for ‘excluded shares’. ITTOIA05/S381E applies to arrangements that:

  • involve only such shares - that is, they do not apply if the arrangement involves shares in combination with, for example, a derivative contract; and
  • for which no ‘relevant arrangements’ have been made in relation to those shares.

An excluded share is one that is:

  • admitted to trading on a regulated market;
  • issued either before 6 April 2013, or
  • where issued on or after 6 April 2013 not one forming part of arrangements that would produce a return that is economically equivalent to interest.

Thus, where shares are admitted to trading on a regulated market on or after 6 April 2013, they will be potentially be within the excluded shares exception unless the shareholder’s return is virtually guaranteed on launch, for example where the investment company’s portfolio is not exposed to investment risk. If relevant arrangements are put in place after launch (see SAIM2780), the excluded shares exception will not be available.

Admitted to trading on a regulated market

‘Regulated market’ here has the same meaning as in Directive 2004/39/EC of the European Parliament and the Council of 30 April 2004 on markets in financial instruments. In other words, it will apply to exchanges in the European Union.