Hartnett on the gilt strips scheme
The Mercury story has thrust 'gilt strips' back into the headlines. This was a scheme from a few years back and caused the government some anguish.
Readers who want more detail could do worse than reading Dave Hartnett's view of gilt strips, given to parliament a few years back.
He said:
This was marketed to and used by wealthy individuals in conditions of some secrecy. The aim was to create and sell options over gilt strips to generate income losses matched by gains that were outside the capital gains tax regime, and the losses were then used to match against other income and reduce tax liability. For some people—and we have not seen the relevant tax returns yet—we understand the aim was to reduce it to nil, so they would pay no tax. It was sold widely by major accounting firms for about six months in the summer of 2003, maybe a little earlier as well, and stopped by the Government by an announcement on 15 January.
He said then it had cost the government £200m. I'll post a fuller description later, hopefully...
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