CTM36875 - Particular topics: transactions in securities: identification of cases and submission to AAG Clearance and Counteraction Team

When compliance officers identify tax advantages capable of counteraction under ICTA88/S703 a short report of the facts should be sent to the Clearance and Counteraction Team (see CTM36810) with a copy of the most recent relevant accounts. Please do not send files. No reference to the possible application of ICTA88/S703 should be made to the taxpayer or agent or raised within ITSA or CTSA enquiries. Cases to be submitted include:

1. where you have received a notification from the Clearance and Counteraction Team that clearance under S707 has been refused CTM36885 and the transactions (or similar transactions for which clearance has not been requested) have been carried out,
2. the sale of shares or other securities to a company in which the vendor has a substantial interest (see example 1 at CTM36840 and the example at CTM36845),
3. the payment of a substantial dividend by a company prior to the sale of shares in that company combined with an agreement whereby some or all of the shareholders waive all or part of their dividend rights in return for a greater share of the sale proceeds (see the example at CTM36835),
4. the sale by a significant shareholder in a close company of part of the holding to the trustees of a pension scheme of which the vendor is a member (see example 2 at CTM36840) or to the trustees of an Employee Benefit Trust where funded by a contribution from the company,
5. the transfer or sale by a company of its assets or business to another company having some or all of the same shareholders followed by the liquidation of the company whose assets etc have been acquired (see the example at CTM36850) or the sale of shares in either company,
6. receipt of capital consideration by shareholders of a company or group following a demerger or scheme of reconstruction from the sale or liquidation of one demerged company where the same shareholders retain an interest via another company involved in the transactions,
7. the sale of shares under any agreement whereby the shares themselves or the underlying assets are subsequently reacquired by the vendor,
8. the acquisition by an individual or a company under his control of shares in a company with accumulated losses at the same time as the assignment to him at a substantial discount of debts due by the loss-making company followed by repayments of the assigned debts,
9. the receipt by a subsidiary of a group of an ‘abnormal dividend’ and consideration received by another UK group member in non-taxable form that may otherwise have been paid up as dividends and liable under Case V.

Do not disclose that the case has been referred to the Clearance and Counteraction Team or enter into technical discussion on possible counteraction under Section 703 or on whether the ‘escape clause' (see CTM36805) applies. If you are asked about the possible application of ICTA88/S703 refer the enquirer to the statutory clearance procedure within Section 707 (see CTM36880).