Income Tax (Trading and Other Income) Act 2005 section 381E

Exception for returns from certain shares

Section 381E provides an exemption from the disguised interest rules for arrangements that involve certain types of listed shares, subject to conditions about when the shares were issued and whether any anti-avoidance arrangements have been made.

• The disguised interest rules do not apply where an arrangement involves only "excluded shares" and no relevant anti-avoidance arrangement has been made in relation to those shares.
• Shares qualify as "excluded shares" if they are traded on a regulated market and were either issued before 6 April 2013, or, if issued on or after that date, did not produce an interest-equivalent return at the time of issue.
• A "regulated market" means a UK regulated market, an EU regulated market, or a Gibraltar regulated market, each as defined by Regulation (EU) No 600/2014 on markets in financial instruments.
• An arrangement is treated as "relevant" (and therefore prevents the exemption from applying) if it was made on or after 6 April 2013 and it is reasonable to assume that a main purpose of it was to secure an interest-equivalent return from the excluded shares.