Background
15.Current income tax rules contain a number of provisions under which interest-like returns are charged to income tax in the same way as interest.
16.The new legislation provides a comprehensive income tax charge on disguised interest. It enables the repeal of existing anti-avoidance legislation on guaranteed returns from futures and options (which are a form of disguised interest arrangement), and allows for the simplification of income tax rules that treat certain amounts arising on stock lending and repos as payments of interest.
17.The legislation follows consultation in 2012 on a number of possible changes to income tax rules on interest. It is based on the disguised interest rule for corporates in Chapter 2A of Part 6 of the Corporation Tax Act 2009 and follows a similar principle-based approach to the drafting of legislation on financial products.
18.In due course it is anticipated that the legislation will facilitate the simplification of other income tax rules that tax returns from interest-like arrangements, such as legislation on deeply discounted securities and accrued income.
