On 28 April 2008, HMRC published an update on the status of its consultation on a proposed "principles-based" approach to financial products tax avoidance.

The consultation was launched on 6 December 2007 (see Legal update, Consultation on principles-based approach to financial products tax avoidance). The original consultation paper set out draft legislation adopting a principles-based approach in two areas: disguised interest and sales of income streams. On 7 February 2008, HMRC published revised draft legislation relating to disguised interest (see Legal update, HMRC publishes revised draft legislation on disguised interest). However, as part of the 2008 Budget, the government announced that this legislation, originally to form part of the Finance Bill 2008, would be deferred until the Finance Bill 2009 (see Legal update, Budget 2008: Financial products avoidance: disguised interest).

HMRC has now announced that two documents will be issued in May, setting out how this consultation is to proceed:

1. The first document will cover transfers of income streams. The document will contain revised draft legislation and explain how this deals with matters that have been raised during the consultation.

2. The second document will cover disguised interest. HMRC notes that this area is likely to require greater taxpayer input than the transfer of income streams. The document will summarise responses to the consultation to date and include proposals intended to address concerns about the scope and effect of the legislation.

Both documents will include a provisional timetable for the continuing work on these measures and explain what form the consultation will take.