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

HMRC officers who in the course of risk assessment identify tax advantages capable of counteraction under this avoidance legislation should send a short report of the facts to the Clearance & Counteraction Team (see CTM36810) with a copy of the most recent relevant accounts and shareholder details but without the file. AAG must give approval before raising the possible application of this avoidance legislation with the taxpayer or agent or mentioning it within ITSA or CTSA enquiries. Cases to be submitted include

1. the carrying out of transactions for which Clearance & Counteraction Team have refused clearance under ITA07/S701 or CTA10/S748 (see CTM36885) - this includes similar transactions for which clearance has not been requested
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 under which 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 an Employee Benefit/Employee Share Option Trust etc where funded by a contribution from the company (see example 2 at CTM36840)
5. the transfer or sale by a company of its assets or business to another company with 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. the 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 a person or a company under the person’s control of shares in a company with accumulated losses at the same time as the assignment to the person at a substantial discount of debts due by the loss-making company followed by repayments of the assigned debts
9. the reconstruction of a company or group of companies where existing shareholders receive capital sums (whether cash, debt or redeemable securities) but remain shareholders of the company or companies following the reconstruction
10. the return of shareholder capital whether financed by a reduction in the share capital or by repayment of a share premium.

Do not

• mention the referral to Clearance & Counteraction Team
• enter into technical discussion on possible counteraction of tax advantages by use of this avoidance legislation or
• discuss whether the ‘escape clause ‘ (see CTM36805) or fundamental change of ownership rules apply.

If necessary simply refer the enquirer to the statutory clearance procedure at CTM36880.