CTM36805 - Particular topics: transactions in securities: tax advantage from: introduction
There are provisions for tax advantages in respect of transactions in securities to be counteracted:
- Income tax avoidance on or after 6 April 2007 can be cancelled by the avoidance legislation ITA07/S682-S713
- Income tax avoidance prior to 6 April 2007 can be cancelled by the avoidance legislation ICTA88/S703-S709
- Corporation tax avoidance (for all periods) can be cancelled by the avoidance legislation ICTA88/S703-S709.
All decisions on invoking this legislation are taken by the
Anti-Avoidance Group Clearance and Counteraction team (explained in
Tax Bulletin 46D April 2000) and are not within the ITSA/CTSA
enquiry regime. See
AAG Intranet Site.
Examples of cases compliance officers should refer to AAG
Clearance and Counteraction for potential counteraction are listed
under
CTM36875. An assessment to cancel
“tax advantages” under this avoidance legislation may
be raised within 6 years from the end of the chargeable period in
which the tax was avoided. No “discovery” or negligence
is required. Interest is charged under the usual provisions but no
penalties apply.
AAG must demonstrate three factors are present if an income
tax or corporation tax advantage is to be cancelled under the
avoidance legislation:
- (i) there is a circumstance within ITA07/S686-690 for income tax on or after 6 April 2007 or ICTA88/S704 for income tax before 6 April 2007 and corporation tax (all periods) (see CTM36825 – CTM36845), and
- (ii) in consequence of one or more transactions in securities (see CTM36815) or the combined effect of the transaction(s) in securities and the liquidation of a company (see CTM36850),
- (iii) a person has obtained a tax advantage (see CTM36820).
If the person in question can show the transactions were carried out for bona fide commercial reasons (or in the ordinary course of making or managing investments) and that obtaining a tax advantage was not one of the main objects of any of the transactions the avoidance legislation will not apply. This is known as the ‘escape clause'. The onus of proof rests with the taxpayer to demonstrate this exception applies.
