Changes to anti-avoidance legislation — transfer of assets abroad provisions
Published 6 March 2024
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This publication is available at https://www.gov.uk/government/publications/amendments-to-the-transfer-of-assets-abroad-provisions/changes-to-anti-avoidance-legislation-transfer-of-assets-abroad-provisions
Who is likely to be affected
This measure will affect UK resident individuals who own or have a financial interest in either UK resident close companies, or non-resident companies that would be close if they were UK resident.
These individuals will have used companies to transfer assets to a separate non-resident person, or to a non-domiciled individual.
General description of the measure
This measure ensures that individuals cannot use a company to bypass anti-avoidance legislation, known as the Transfer of Assets Abroad (ToAA) provisions.
The measure introduces a provision that deems individuals who are participators in a close company, or a non-resident company that would be close if they were UK resident, as transferors to address situations where transfers are made by such companies. This change will ensure that a transfer made via a company, in which the individual is an owner or has a financial interest, will be considered a ‘relevant transfer’ by that individual for the purposes of the ToAA legislation.
The measure will not impact transactions where there is no tax avoidance purpose or where the transactions are genuine commercial transactions, as set out in s736 to s742 Income Tax Act 2007.
Policy objective
The measure will promote fairness in the UK tax system and ensure that UK resident individuals are unable to sidestep the ToAA provisions where a company is used to make a transfer to avoid a liability to tax.
Background to the measure
This measure was announced at Spring Budget 2024.
Detailed proposal
Operative date
The measure will have effect for income arising to persons abroad on and after 6 April 2024.
Current law
Current law is contained in Chapter 2 of Part 13 of the Income Tax Act 2007 (ITA).
Section 715 of the ITA provides a definition of a relevant transaction.
Section 716 of the ITA provides what is meant by a relevant transfer.
Sections 720-726 of the ITA set out the income tax charge where an individual has the power to enjoy income.
Sections 727-730 of the ITA sets out the income tax charge where an individual receives capital sums.
Proposed revisions
A new section 720A will be added to Chapter 2 of Part 13 of Income Tax Act 2007. This section will apply for the purpose of preventing the avoidance of a liability to tax where an asset has been transferred to a person abroad. It will apply to a transfer made by a closely-held company such that it will be treated as being made by an individual with a qualifying interest, where the individual will have the power to enjoy the income arising abroad.
A new section 727A will be added to Chapter 2 of Part 13 of Income Tax Act 2007. This section will apply for the purpose of preventing the avoidance of a liability to tax where an asset has been transferred to a person abroad. It will apply to a transfer made by a closely-held company such that it will be treated as being made by an individual with a qualifying interest, where the individual will have received a capital sum as a result of the relevant transactions.
Summary of impacts
Exchequer impact (£million)
| 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 |
|---|---|---|---|---|---|
| — | 0 | +10 | +5 | negligible | negligible |
These figures are set out in Table 5.1 of Spring Budget 2024 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Spring Budget 2024.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
The measure is not expected to impact on family formation, stability or breakdown.
This measure is expected to affect a very small number of UK residents who enter into transactions which has seen them transfer assets abroad through use of a company.
Individuals will not need to do anything differently as they will still need to report to HMRC as they would have done prior to the measure.
This measure is expected overall to have no impact on individuals’ experience of dealing with HMRC as the change doesn’t change any processes or tax admin obligations.
Equalities impacts
This measure will impact wealthy individuals. Based on the population, the measure will therefore likely impact those who are male and older.
Individuals will only be affected if they have sought to avoid a tax liability.
It is not anticipated that there will be impacts on other groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on a small number of businesses. Businesses that provide tax advice to individuals will need to be aware of the impact of this measure on their clients.
A one-off cost will include familiarisation with the changes. It is not anticipated they will incur any continuing costs.
Customer experience is expected to remain broadly the same as this measure does not alter how affected businesses interact with HMRC.
This measure is not expected to impact on civil society organisations.
Operational impact (£million) (HMRC or other)
There are no operational or delivery impacts for HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored through information collected from tax returns and internal HMRC risk evaluation work.
Further advice
If you have any questions about this change, contact the Personal Tax International Policy Team by email: [email protected].