• Principles based approach to financial products
• Income-shifting
• Avoidance using authorised investment funds
• Leasing
• Anti-avoidance on employment related shares or securities
• Tax avoidance disclosure regime

Principles based approach to financial products

The disguised interest rules continue to be discussed with interested parties. Responses are requested by 11 February 2009 with a view to the changes being introduced in Finance Bill 2009. The object of the disguised interest legislation is to replace current legislation with a comprehensive rule to bring interest-like returns into the charge to corporation tax.

Changes are also proposed to the transfer of income streams which will treat the sales of income streams (without the assignment of the underlying property) as income.

Income-shifting

The Government considers that it is unfair to allow a minority of individuals to benefit financially from shifting part of their income to someone else who is subject to a lower rate of tax – known as income shifting. The Government has consulted on this issue, but given the current economic challenges is deferring action on income shifting and will not bring forward legislation at Finance Bill 2009. The Government will instead keep this issue under review.

Avoidance using authorised investment funds

The Government is introducing additional anti-avoidance measures in relation to authorised investment funds as a result of disclosures made to HM Revenue & Customs (HMRC).

The additional provision will prevent corporate streaming provisions applying to all investors for whom an authorised investment fund dividend is to be treated as a trading receipt. As a result of the change only general insurance companies will remain within the current rules.

Leasing

The Government announced on 13 November 2008 that it would take action, effective from that date, to prevent a loss of tax:  

• on transactions involving the leasing of plant or machinery under long funding leases;
• on the sale of a company that is an intermediate lessor of plant or machinery; and
• on rents payable on long funding leases of films.

Anti-avoidance on employment related shares or securities

Measures are being introduced to simplify certain tax rules associated with employment-related shares or securities acquired at less than market value, primarily to remove a charge to tax where the employee has not made an overall profit.

Tax avoidance disclosure regime

Measures proposed are being introduced to simplify and improve the procedure by which scheme users report a scheme reference number.