Revenue closes bonds tax loophole

13 April 2012

THE Inland Revenue today closed a £200m-a-year loophole whereby losses on UK Government bonds have been deliberately generated to set against taxable income.

Effective from today, the new rules are aimed at individuals and trusts selling gilts at a loss then recouping the shortfall with income that is not taxable.

They have, for example, been selling a gilt worth £100 for only £10, incurring a loss of £90. But they have simultaneously charged the buyer £90 for the option to buy the gilt, offsetting the loss on the sale. Income from the sale of an option is not taxable.

The Revenue will now assess the real economic value of the transaction. A spokeswoman said tax avoidance through gilts had begun in the past year after other securities tax loopholes were closed.

Treasury Paymaster General Dawn Primarolo said: 'Schemes like this rob honest taxpayers and essential public services of revenue, and we are determined to take all appropriate action to counter them.'

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