Transactions in Securities (signpost)

The Transactions in Securities (TiS) rules are anti-avoidance rules. When triggered, they subject profits or gains to Income Tax, thus disqualifying them from the typically more favorable treatment under Capital Gains Tax (CGT).

Subscribers, see Transactions in Securities for a detailed guide to this topic. 

This is a freeview 'At a glance' guide to the Transactions in Securities (TiS) rules.

At a glance

The TiS rules have evolved over time. 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 the avoidance of Income Tax.
• The TiS rules do 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 either 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.

The Finance Act 2016 changes:

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 (it is in ITTOIA 2005), when the phoenixing rules apply it will result in an Income Tax charge arising where CGT might otherwise have applied. 
3. Amended the process that HMRC is required to follow to counteract a tax advantage.

Index to our guides

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

• The Targeted Anti-Avoidance rule (TAAR) aims to prevent company owners from gaining a tax advantage from the practice of phoenixing.
• Does the TAAR apply? The test for TAAR takes less than two minutes using our TAAR Tool.
• See TAAR: Distributions on Winding-up 

Transactions in Securities

• 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

• Case studies which illustrate key principles in the rules.
• See Transactions in Securities case studies

More useful guides

• 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.
• Reorganisation Zone
  Reorganisations of share capital tax take many different forms and a TiS tax clearance is recommended in most cases.