Ken Moody attempts to navigate through the practical consequences of the anti-avoidance rules to deter so-called ‘phoenixism’.
The ‘phoenixism’ anti-avoidance legislation in question at ITTOIA 2005, s 396B (‘Distributions in a winding-up’) is a curious animal in various ways. It complements changes to the transactions in securities (TiS) rules in ITA 2007, which now specifically identify a distribution in a winding-up as a TiS (at ITA 2007, s 684(2)(f)).
A trap for the unwary
However, unlike the TiS rules, HMRC decided at the start that no clearance procedure would be available for ITTOIA 2005, s 396B, which may therefore present a dilemma for the taxpayer and their professional advisers. If applicable, section 396B ‘converts’ a capital distribution to a shareholder in a winding-up into an income distribution. ;<
