The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:
The transactions in securities legislation is anti-avoidance legislation aimed at situations where close company shareholders have engineered a disposal of shares to obtain a beneficial CGT rate, ie avoid income tax, on specified transactions. Following consultation, in 'Simplifying Transactions in Securities Legislation', the rules have been amended by Finance Act 2010. Most of the changes apply to individuals.
The rules are well illustrated by considering the case of CIR v Cleary. In this case, two sisters sold the shares in one of their companies to another in return for cash proceeds of £121,000 (considered to be market value). The House of Lords considered that this was caught by the transactions in securities rules and that the proceeds of £121,000 were subject to income tax. HMRC set out how it considered the conditions for the transactions in securities rules were met:
Commissioners of Inland Revenue v Cleary 44 TC 399 (subscription sensitive)
HMRC seeks to apply this principle in particular to situations where a management team receive a continuing stake in the company set up to acquire their shares in the 'old company' on a secondary management buyout.
The rules need to be considered in many situations. You need a good awareness of the rules to be able to identify situations where they may be relevant. The starting point is always to consider whether a situation is entirely outside the scope of the
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