Transactions in securities

By Tolley

The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

Transactions in securities
Introduction
Scope of the transactions in securities rules
What is a transaction in securities?
Conditions
Excluded circumstances
Calculation of income tax advantage

The transactions in securities legislation is an anti-avoidance provision aimed at counteracting the tax advantage arising as a consequence of one or more transactions in securities which meet specific conditions. Essentially, the transactions in securities provisions apply an income tax charge to certain situations which would otherwise be subject to the capital gains tax rules (ie there has been tax avoidance because income has been turned into gains).

Although it relates to matters which occurred in the 1960s under old legislation, the Cleary case is a good illustration of the type of situation the transactions in securities rules are designed to catch.

The Cleary sisters sold shares in one of their companies to another of their companies in return for market value cash proceeds of £60,500 each. The House of Lords decided that the proceeds of the transaction were rightly chargeable to income tax. The transaction in securities rules were met because:

•the sale of shares was a transaction in securities
•the company was close and the sisters received consideration which would have been available for distribution by the company if the company had applied them otherwise, and
•the sisters would have obtained a tax advantage (in the absence of the counteraction notice) by avoiding income tax

CIR v Cleary 44 TC 399 (subscription sensitive)

Introduction

This guidance note covers the new rules which have been in place since 24 March 2010 (and were amended in April 2016) as they apply to individuals. For details of the regime which applies for companies and applied to individuals before 24 March 2010, see Simon's Taxes D9.102A–D9.116 (subscription sensitive).

The rules need to be considered in many situations. You need a good awareness of the rules to be