Overall, we welcome the introduction of a standardised tax regime for property derivatives. This should assist companies to better manage their property interests. However, several features of the proposed regime will need alteration to work satisfactorily.
The proposed regime on equity derivatives is unwelcome, and unnecessary:
- Companies have only just got to grips with the changes to the taxation of derivatives introduced by the Finance Act 2002 and now is not the time to introduce fundamental changes.
- The changes would lead to the loss of indexation relief for equity derivatives held as capital assets.
- In many cases a company would be entitled to substantial shareholding relief in respect of gains realised on an equity derivative where the derivative relates to shares which the company holds and which themselves qualify for substantial shareholding relief. It is not clear to us how this relief would be preserved under the new regime.
