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HMRC internal manual

Savings and Investment Manual

Disguised interest: transitional rules

The disguised interest rules apply to returns from arrangements to which a person becomes party on or after 6 April 2013. Returns arising on or after 6 April 2013 from arrangements entered into before 6 April 2013 are not caught by the disguised interest rule, unless they are returns from arrangements that would have been within the provisions that were repealed by FA13/SCH12. These provisions are the legislation on guaranteed returns from disposals of futures and options, and on manufactured payments and repos (SAIM2710).

Where a person was party to such arrangements before 6 April 2013, returns arising on or after that date are taxable as disguised interest.

Where a pre-6 April 2013 arrangement that was not within the disguised interest rule is rolled over or refreshed, for example as part of a reconstruction undertaken on or after 6 April 2013, this will amount to a new arrangement, and returns from it after 6 April 2013 will be disguised interest.

Excluded shares

Shares issued before 6 April 2013 and admitted for trading on a regulated market are excluded from the disguised interest provisions, subject to an anti-avoidance provision where arrangements are entered into after that date. The tax treatment applying to such shares before 6 April 2013 will therefore be grandfathered in most cases. See SAIM2770.