Clarifying Taper II

The taper relief legislation contains three specific provisions in paragraphs 10 11 and 12 of Schedule A1 to the Taxation of Chargeable Gains Act 1992 intended to counter tax avoidance. Paragraph 10 deals with 'periods of limited exposure to fluctuations in value'; paragraph 11 covers changes of activity in a close company; and paragraph 12 relates to certain value shifting into close company shares.

The first point to note is that these provisions do not contain a motive test. Therefore a taxpayer whose actions fall within the scope of these provisions will suffer a loss of taper relief irrespective of whether his actions were motivated by tax avoidance or by economic necessity.

The second point is that where these provisions apply any entitlement to the 'bonus year' when calculating the qualifying holding period is lost.

The third point is that whereas in some...