CGT 41 Transfer of Assets Abroad Flashcards
Typical arrangements which fall within the ‘transfer of assets abroad’ (ToAA) legislation are….
those where a UK resident individual transfers assets to an overseas trust or overseas company, and they, their spouse/civil partner and/or their family can benefit from those assets.
When do the Transfer of assets abroad rules apply?
The rules only apply where the purpose of the transfer is to avoid tax.
A tax charge arises under ITA 2007, s.720 if Conditions A, B and C are satisfied. What are the conditions?
Condition A is that a transferor (or their spouse/civil partner) has the power to enjoy the income of a person abroad as a result of the relevant transfer.
Condition B is that the income of the person abroad would be chargeable to income tax if it were the transferor’s and received in the UK.
Condition C is that the transferor is UK resident in the tax year.
‘Power to enjoy’ means …
an ability to ‘benefit’ at any time from the income of the non-resident person. It could include the power to control - ie a trust.
The effect of s.720 is to …
tax the UK resident on the annual income arising to the non-resident person. A s.720 charge is only imposed if not taxed by another charging provision
ITA 2007, s.731 imposes a charge on a transfer of assets abroad where a non-transferor receives a benefit.
A s.731 charge typically arises where….
a UK individual creates a nonresident trust from which the transferor or their spouse/civil partner cannot benefit.
Where s.731 applies….
the income of the non-resident person is ‘matched’ with the benefits received by a UK resident individual and an income tax charge arises in the year of matching.
Typical arrangements which will fall within the ‘transfer of assets abroad’ legislation are those where:
- a UK resident individual transfers assets to an overseas trust from which they,
their spouse/civil partner and/or their family can benefit; or - a UK resident individual subscribes for shares in an offshore company subsequent to which benefits are received by the individual or their spouse/civil partner and family.
