Rules of Transactions in Securities falls under the category of anti-abuse rules. If applied, any gain or profit is charged tax, thus denying the favorable treatment of Capital Gains. 

Since its inceptions, TiS rules have witnessed several amendments, the most recent of which were part of the Finance Act 2016. 

  1. Under a TiS rule, HMRC enjoys power of counteracting the advantage of a Corporation Tax or Income Tax as a result of the transactions between the owners and Close Companies. 
  2. If the fundamental aim of the transaction is an ownership change, then TiS rules will not be applied. 
  3. The TiS rules are triggered if the sole purpose of the share-based transaction is tax avoidance. 
  4. The income tax advantage usually emanates when the transaction results in the escape of Income Tax or where as a result of the transaction, one manages to escape Income Tax Treatment to acquire Capital Gains Treatment that would have been applied if the transaction had not been undertaken in that way. 

However, the amendments to Finance Act 2016 has:

  1. Expanded the scope of rules of Transactions in Securities to counterbalance the tax advantage if someone tries to acquire consideration by treating shares as capital instead of income. 
  2. Implemented TAAR (Targeted Anti-Avoidance Rule) to tackle ‘phoenix activity’. When TAAR is triggered, it results in Income Tax Charge where otherwise capital gains reliefs have applied
  3. Introduced amendments in the procedure being pursued by HM Revenue & Customs to tackle tax advantage.

The sole aim of TAAR is to bar owners of the companies from securing a tax advantage through phoenix activity.

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