Joe Brough explains the circumstances in which HMRC can counteract transactions which fall foul of the transactions in securities legislation and the tax implications for the individuals concerned.
For higher and additional rate taxpayers, receiving distributions from a company as capital rather than income will generally result in a lower tax liability.
Background
The starting point for considering whether a particular transaction is caught by the transactions in securities legislation is to understand what a security is, and to what types of transactions it relates. Some transactions are specifically excluded from the legislation, along with the normal payment of dividends, which simply give effect to rights already held (IRC v Laird [2003] UKHL 54).
It is important to remember that the
