- ToAA rules take precedence in Montpelier avoidance scheme (Lancashire and others v HMRC)
- What are the practical implications of this case?
- What was the background?
- What did the court decide?
- Case details
Private Client analysis: This case involved a marketed tax avoidance scheme designed to enable Mr Lancashire and the other lead appellants to receive income generated from the provision of their services to UK clients free of income tax and National Insurance contributions. The First-tier Tribunal (Tax) (FTT) dismissed the appeal, holding that the Transfer of Asset Abroad (ToAA) provisions (now Chapter 2, Part 13 of the Income Tax Act 2007 (ITA 2007)) applied, taking priority over the charge to tax on employment earnings. Accordingly, the income deemed received by Mr Lancashire was trading income, not employment earnings, and was therefore not entitled to a pay-as-you-earn (PAYE) credit. The case contains helpful guidance on when there is a transfer of assets under a consultancy agreement and detailed analysis of the priority of the ToAA provisions where other deeming provisions apply. It also addresses whether the enjoyment conditions are exclusive. The arguments are complex and will be relevant to all considering the application of the ToAA provisions. Written by Katherine Bullock, barrister at Field Court Tax Chambers.
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