Philip Simpson QC examines the changes made to transactions in securities by FA 2016, and explains how unexpected tax charges can arise
Currently, and for most of the lifetime of income tax, income has been taxed at higher rates than capital receipts. The transactions in securities provisions, now nearing 60 years old (the first tax year they applied was 1960/61), seek to prevent taxpayers from receiving in the form of capital what would, in normal course, be received in the form of dividends. The provisions relating to income tax have been both clarified and broadened by Finance Act 2016. There are similar provisions in relation to corporation tax: CTA 2010 Part 15. However, these have not been amended by FA 2016. Therefore, this article will not cover them.