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Nicholas Barnes v HMRC

In Nicholas Barnes v HMRC (A3/2013/0395 – 30 January 2014) Mr Barnes had participated in a tax avoidance scheme exploiting both accrued interest relief and manufactured interest relief in relation to the same income.

The scheme failed unless both reliefs were available. Both reliefs apply to the payment of interest to the transferee of securities in respect of a period during which the transferor held the securities and the transferee passed part of that interest back to the transferor.

Vos LJ considered that the arrangement viewed ‘realistically’ constituted a ‘stock lending arrangement’ as Mr Barnes was required to return the very same securities that he had borrowed. Consequently accrued interest relief was not available (ICTA 1988 s 727(2) and TCGA 1992 s 263(B)) and the scheme failed.

In case the court was wrong and accrued interest relief did apply Vos LJ also considered...

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