This document discusses these rules in detail, together with the required conditions; relevant consideration; excluded circumstances; and calculation of income tax advantage.

The transactions in securities legislation is anti-avoidance legislation aimed at situations where close com-pany 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 mar-ket 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:

  • 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 (ie by buying the shares)
  • the sisters obtained a tax advantage (but for the issue of a counteraction notice), ie they had avoided income tax

Commissioners of Inland Revenue v Cleary 44 TC 399 (subscription sensitive)

Access this article and thousands of others like it free for 7 days
with a trial of TolleyGuidance.

ACCESS THE FULL ARTICLE

Already a subscriber? Login

Request a Free Trial to TolleyGuidance to gain access to the full article

TolleyGuidance is produced by specialists within the field, our tax guidance materials provide actionable insights and practical guidance to support you day-to-day. We don’t just inform you about the latest changes in the tax world. We take the time to explain the implications and, most importantly, what actions you need to take for your clients.


A bit about you:

Please note that all fields marked with a * must be filled in
Salutation
First name*
Last name*
Company*
Job title*
Email*
Phone*
Postcode