Finance Bill Tracking Service 2010 | Budget 2010


Who is likely to be affected?

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

General description of the measure

2. Legislation will be introduced in Finance Bill 2010 to replace the existing transactions in securities legislation with clearer legislation targeted more effectively at arrangements involving tax avoidance.

3. The scope of the new legislation is limited to transactions with a tax avoidance purpose but now additionally applies to certain arrangements involving close companies. The effect of the legislation continues to be to counteract the income tax advantage.

4. The opportunity has also been taken to remove some confusing words in a heading that should have been removed by SI 2009/56.

Operative date

5. 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. The inconsequential amendment referred to in paragraph 4 above is effective from 1 April 2009.

Current law and proposed revisions

6. Existing legislation in the Income Tax Act 2007 provides for the counteraction of an income tax advantage when a person enters into certain transactions in securities involving the receipt of an abnormal amount of dividend with a view to obtaining that income tax advantage. Previous legislation covered UK listed as well as non-listed companies. The replacement legislation is targeted only at close companies including overseas companies.

7. The new legislation now makes clear how the tax advantage is to be quantified but will continue to counteract it in the same way.

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

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

Further advice

10. This legislation is the outcome of the consultation document Simplifying Transactions in Securities Legislation published on 31 July 2009. The summary of responses was published on 9 December 2009.

11. If you have any questions about this change, please contact Chris Orchard on 020 7147 0396 (email: Information about Budget measures is available on the HM Revenue & Customs website at