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Uncertainty around Transfer of Assets Abroad regime increases following latest Fisher case judgment

The Court of Appeal has now handed down judgment in the long-running Fisher litigation, over-turning the Upper Tribunal’s earlier decision

The judgment has important implications for anybody advising on the Transfer of Assets Abroad regime under which income arising to a non-resident entity (typically a trust or a company) can be taxed on a UK individual who has transferred assets to that entity.

Four points are worth noting in particular.

  • An individual does not need to make a direct transfer to be within the scope of the rules. They simply need to be somebody who “in reality” was the transferor. This includes somebody who “procures” a transfer. Critically, this can include a minority shareholder who, in conjunction with other shareholders procures that a company makes a transfer. A transfer of assets from a UK company to a non-UK company may therefore result in a tax liability for any UK shareholders who approved the transfer.

  • Being in a position to prevent a transfer but simply doing nothing is not enough to make somebody a quasi-transferor.

  • A director who is not a shareholder will not be a quasi-transferor in relation to transfer by a company since the director will be acting as an officer, not for themselves.

  • The motive defence (which applies where the transfer has no tax avoidance purpose) may not be available to a transferor with no tax avoidance motive if there is a joint transferor who does have a tax avoidance purpose.

Phillips LJ provides an important dissenting judgment, stating that he does not believe it possible to say that a minority shareholder can procure a transfer by the company simply by voting in favour of that action.

If the history of this litigation is anything to go by, this decision is likely to be appealed.

…it seems to me that if two or more individuals, acting for themselves (whether or not also acting as agents or company officers), together cause a company to effect a transfer, they will be quasi-transferors and within the scope of section 739.

Tags

private client, tax, income tax, transfer of assets abroad, hmrc, quasi-transferor, court of appeal

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