The Transactions in Securities (TIS) rules are anti-avoidance rules. When they apply to a transaction any profit or gain is taxed as income, denying any generally more favourable capital gains tax treatment.

The rules underwent major change in the 2010 Finance Act, and the Finance Act 2016 introduced new targeted rules.

  • The TIS rules give HMRC the power to counteract an income tax or corporation tax advantage resulting from transactions made between Close Companies and their owners.
  • For the TIS rules to bite: the main or one of the main purposes for undertaking a share based transaction has to be tax avoidance.
  • The TIS rules will not apply where the transaction results in a fundamental change in ownership of the company.
  • An income tax advantage typically occurs when the result of the transaction is that something escapes income tax or capital gains treatment is obtained instead of the income tax treatment that would have been expected to have applied were the transaction not to have been undertaken in that way.

Finance Act 2016:

  1. Widened the existing TIS rules to counteract a tax advantage when a person contrives to receive consideration in respect of shares as capital rather than income.
  2. Introduced a new Targeted Anti Avoidance Rule (TAAR) which applies to distributions in respect of share capital in a winding up in order to combat "phoenixing". Although not specifically within the TIS rules (its in ITTOIA 2005) it will, when it applies, result in an income tax charge arising where capital gains tax might otherwise have appied. 
  3. Amended the process that HMRC is required to follow to counteract a tax advantage is changed.

TIS Index

Targeted Anti-Avoidance rule (TAAR): distributions on winding up

  • The Targeted Anti-Avoidance rule (TAAR) aims to prevent company owners gaining a tax advantage from the practice of phoenixing.
  • Does the TAAR apply? Test for TAAR is less than 2 minutes, see the TAAR Tool: TAAR: Distributions on Winding up 

Transactions in Securities TIS)

  • Overview, FAQs, looking at common issues and transactions. What's new, Tax clearance, tax cases
  • See Transactions in securities (subscriber guide)

Transactions in Securities case studies

See also:

Surplus cash CGT & IHT reliefs
Whilst the TIS rules will cancel a tax advantage obtained when a transaction is taxed under the CGT regime you still have to make sure that CGT treatment is possible.

 

Would you like to unlock the whole site?

Recommendations: read what subscribers have to say about this webservice.

Click here to register for FREE news and join us.