The measure

Following the consultation document Simplifying Transactions in Securities Legislation published on 31 July 2009, clearer legislation will be introduced in the Finance Bill 2010 targeting arrangements involving tax avoidance more effectively.

Existing legislation provides for the counteraction of an income tax advantage when a person enters into certain transactions in securities with a view to obtaining that income tax advantage.

Previous legislation covered UK listed as well as non-listed companies. The scope of the new legislation is limited to transactions with a tax avoidance purpose and the replacement rules will only apply to certain arrangements involving close companies including overseas companies.

The effect of the legislation continues to be to counteract the income tax advantage. The new legislation also makes clear how the tax advantage is to be quantified.

Who will be affected?

Individuals entering into transactions in securities to obtain an income tax advantage.

A wider range of companies will be covered by the new legislation but the new income tax advantage test and new exemption covering fundamental changes in ownership of close companies will mean fewer individuals need to consider whether the rules apply to them. 

Certain transactions by companies involving 'dividend stripping' and similar arrangements are no longer covered by the legislation because avoidance opportunities involving these arrangements have been removed.

When?

The measure will generally have effect for transactions where the tax advantage is obtained on or after 24 March 2010.

Some aspects of the measure affect the Corporation Tax Act 2010 and will have effect at the same time as that Act.