The Income Tax (Dealers in Securities) Regulations 1992

Explanatory Note

(This note is not part of the Regulations)

These Regulations, which come into force on 22nd March 1992, are made under section 732(2A) of the Income and Corporation Taxes Act 1988 (“section 732(2A)”), inserted by section 56 of the Finance Act 1991. Section 732(2A) confers an additional exemption from the bond washing provisions of the 1988 Act. Bond washing is a device for turning income into capital by selling shares cum dividend. Sections 731 to 735 of the 1988 Act penalise the purchasers of such shares. Section 732(1) penalises purchasers who are securities dealers, and section 732(2) confers an exemption on securities dealers who are Stock Exchange market makers. Section 732(2A) permits the Treasury by regulations to prescribe the persons who will additionally be exempt from section 732(1) and the circumstances in which the exemption will apply. The subsection was inserted in the 1988 Act following the proposal to merge the London International Financial Futures Exchange and the London Traded Options Market of the London Stock Exchange to form the London International Financial Futures and Options Exchange (“LIFFE”). The date of coming into force of these Regulations coincides with the completion of the merger between the two Exchanges.

Regulation 1 provides for citation and commencement and regulation 2 for interpretation.

Regulation 3 prescribes for the purposes of section 732(2A) the persons who will be exempt from section 732(1) and the date from which the exemption runs.

Regulation 4 prescribes for the purposes of section 732(2A) the circumstances in which section 732(1) shall not apply.

Regulation 5 defines the expressions “the Max limit” and “the Deltaplus limit” for the purpose of regulation 4.