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Income due on securities

17 April 2015
Issue: 4497 / Categories: Tax cases , Avoidance , Income Tax

A Savva & others v CRC, Upper Tribunal

UBS Wealth Management marketed an avoidance scheme called Sterling Investment in Capital Security (STICS) which took the form of an investment giving UK-resident individuals a tax-efficient fixed rate of return compared with holding cash or short-to-medium-term deposits.

The company sold corporate bonds that had been stripped of interest at a discounted price. The purchaser would hold the bond until the end of the stripped period and then the bond would be sold for its full undiscounted value.

The intention was for the profit realised by the buyer to be treated as capital and be exempt from capital gains tax as a gain on the disposal of a qualifying corporate bond.

The taxpayers in the instant case were members of the same family. They had sold a business and invested the proceeds in the UBS scheme in September 2004. They sold the bonds in January 2006.

HMRC ruled that...

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