CGT40 Transactions in Securities

Question 1

Who do the ‘transactions in securities’ rules target?

Answer 1

The ‘transactions in securities’ rules target close companies where director/shareholders are in a position to manipulate how they extract value

Question 2

The rules apply where ….

Answer 2

an individual is a party to a ‘transaction in securities’ and one of the main purposes of the transaction is to obtain an income tax advantage.

Question 3

Typical arrangements which fall within transactions in securities rules …

Answer 3

are those which seek to turn income into capital gains.

Question 4

Where HMRC has reason to believe that the ‘transactions in securities’ legislation applies ….

Answer 4

an officer of HMRC can open an enquiry into the transaction.

Question 5

If on enquiry HMRC determine that the legislation applies, HMRC can issue a ….

Answer 5

‘counteraction notice’ setting out the adjustments required to nullify the income tax advantage.

Question 6

The ‘transaction in securities’ rules do not apply in situations where there has been a fundamental change in ownership of the company.

What constitutes a fundamental change in ownership?

Answer 6

There is a ‘fundamental change’ if, as a result of the transaction, the original shareholder (together with associates) does not hold more than 25% of the ordinary share capital.