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GAAR guidance: examples of non-abusive transactions—checklist

GAAR guidance: examples of non-abusive transactions—checklist The GAAR guidance aims to help interpret and apply the general anti-abuse rule (GAAR). This is why the GAAR guidance includes in Part D various examples to illustrate the types of arrangements HMRC considers should escape the GAAR and those which it considers should be caught by the GAAR. The current version of the GAAR guidance, as well as previous versions of the guidance, are available online (see: GAAR guidance). Part D of the GAAR guidance (which is dated 11 September 2020) contains the majority of the illustrative examples, but some are found in other parts of the guidance too. For ease of reference, the table in this Checklist: • pulls together • in one place • a list of the arrangements: ◦ referred to in any part of the GAAR guidance ◦ in respect of which HMRC has indicated it would not pursue counteraction under the GAAR (although note that much of the legislation underlying the examples has changed since the examples were...

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Tax issues on earn outs on share sales

The way consideration payable for the acquisition of shares is structured is not always straightforward. In many cases payment can be delayed, deferred or made conditional pending the satisfaction of some contingency.Selling shareholders will seek to maximise the total consideration they will receive for their shares but will also try to mitigate any tax liability on the disposal by:•maximising the use of available reliefs to reduce or eliminate any charge, and/or•deferring the time that any such tax charge becomes payableWhere the consideration is deferred, however, the selling shareholder can incur a tax liability on an amount of consideration which it has not actually received (referred to as a ‘dry’ tax charge).No discount is generally allowed in the computation of chargeable gains for any consideration which is ascertainable at the time of the share disposal even if it is:•delayed•subject to any contingency, or •at risk of not being received for some reasonWhere any deferred consideration is unascertainable at the time the shares are sold, the rule in Marren v Ingles applies...

Tax issues for bondholders

This Practice Note will consider the following:•direct tax issues for UK resident corporate bondholders•direct tax issues for UK resident individual bondholders, and•the UK stamp tax and VAT consequences of being a bondholder (whether individual or corporate)Bondholders may also be interested in the potential consequences for them of Foreign Account Tax Compliance Act (FATCA) and the EU Financial Transactions Tax (FTT). These are considered in Practice Note: Tax issues for bond issuers—FATCA and FTT.Direct tax issues for corporate bondholdersFor UK resident companies acquiring a bond, the main tax issues to consider are:•the loan relationship rules—the bond is almost always a loan relationship and will be taxed accordingly•chargeable gains—the bond is almost always a qualifying corporate bond and exempt from corporation tax on chargeable gains, and•withholding tax—the bondholder will hope that it is able to rely on an exemption from withholding taxEach of these issues is explored further in the remainder of this section.Loan relationshipsAs for the bond issuer, the bondholder will almost always be treated as having a loan relationship because...

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SIP rules

SIP rules FORTHCOMING CHANGE: Following its announcement as part of the Spring Budget on 15 March 2023, HMRC published a call for evidence on how to improve and simplify non-discretionary tax-advantaged Save As You Earn (SAYE) and Share Incentive Plan (SIP) schemes on 5 June 2023. The call for evidence focuses on the effectiveness and suitability of SAYE and SIP, participation levels in the schemes, their flexibility and ease of operation and administration, whether the schemes are appropriately targeted to incentivise share ownership amongst those on lower incomes, and how other performance incentives compare to SAYE and SIP. The deadline for responses is 25 August 2023. For further details, see: Share Incentives weekly highlights—8 June 2023. 1 Definitions and interpretation 1.1 The following words and expressions have the following meanings: Accumulation Period • in relation to Partnership Shares, the period during which the Trustee accumulates a Qualifying Employee's Partnership Share Money before acquiring Partnership Shares or repaying it to the employee; Acquisition Date • (a) in...

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Is there a disposal which creates a chargeable gain when a simple debt (ie not a security) is converted into a qualifying corporate bond by the issue of an instrument and where the creditor is not the original creditor?

Is there a disposal which creates a chargeable gain when a simple debt (ie not a security) is converted into a qualifying corporate bond by the issue of an instrument and where the creditor is not the original creditor? We have assumed that all relevant parties are UK resident companies. We have also assumed the following scenario: • X Ltd owes money to Y Ltd, but not as a result of the lending of money (it could be because Y Ltd previously supplied X Ltd with goods or services that have not been paid for). This is a debt, and debts are assets for chargeable gains purposes. However, as the debt did not arise from a transaction for the lending of money, it is not a loan relationship for the purposes of the corporate debt rules, and also not a qualifying corporate bond (QCB) for the purposes of the chargeable gains rules • Y Ltd assigns the debt to Z Ltd. Assuming that the debt is not...

What is the chargeable gain treatment of a sale of cryptoassets for consideration in the form of a promissory note? Will the loan relationship rules apply?

What is the chargeable gain treatment of a sale of cryptoassets for consideration in the form of a promissory note? Will the loan relationship rules apply? When a person disposes of an asset and makes a profit that is capital in nature, this has the potential to be a taxable chargeable gain. On the assumption that the cryptoassets that are the subject of this question have appreciated in value while owned by the seller, so that any chargeable gain calculation would result in a gain rather than a loss, the issues to be considered here are: • whether the cryptoassets are the type of asset that would attract capital gains tax (or corporation tax on chargeable gains, for a corporate seller: in this response, 'CGT' is used a shortform for both capital gains tax and corporation tax on chargeable gains), and • the implications of the consideration taking the form of a promissory note Cryptoassets as chargeable assets Cryptoassets take a range of forms and their treatment for...

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Tax weekly highlights—14 November 2019

This week’s edition of Tax highlights includes: (1) the OECD’s consultation on ‘pillar two’ of the proposals on digital economy taxation, (2) the FTT’s decision in Snow Factor Limited, finding a restructuring was an abuse of rights for VAT purposes, and (3) the FTT’s decision in Angela Salazar allowing an appeal against penalties imposed by HMRC in respect of an employment intermediary failing to file a return relating to workers.

QCB conversion scheme ineffective (Hancocks v HMRC)

Tax analysis: the Court of Appeal (CA) has confirmed the failure of a scheme which attempted to remove accrued capital gains from the tax net altogether through a very particular reading of a part of the statutory provisions dealing with conversions of securities.