Transfer of assets abroad code

By Tolley
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The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Transfer of assets abroad code
  • Introduction
  • What is a transfer of assets abroad?
  • The charging provisions of the Code
  • Charge where power to enjoy income
  • Charge where capital sums received
  • Charge where benefit received
  • The motive defence
  • Reporting a liability under the Code
  • More information

Introduction

The code is a widely drafted set of anti-avoidance provisions that seek to prevent the avoidance of UK taxation by transferring assets abroad. For the code to apply, there needs to be a transfer of assets by a UK resident individual, such that income deriving from those assets becomes payable to a ‘person’ abroad. This guidance note outlines the elements of the code and where it fits into the non-UK resident trust landscape.

ITA 2007, Part 13, Chapter 2

In its simplest form, the code will attach to arrangements involving non-UK trusts, companies and foundations into which ‘assets’ are transferred by a UK resident individual. The definition of asset is very widely cast and can be sited within or without the UK.

There is a degree of overlap between the provisions of the code and other provisions relating to the taxation of income or capital gains. These are noted in the text with an indication of which rules take precedence.

In addition, there is a ‘motive defence’ to the charging provisions, which provides an exemption to the code where there is no tax avoidance purpose or where a genuine commercial reason for the transfer exists. See below.

ITA 2007, ss 736–742

Refer to INTM600060 for a checklist of indicators of arrangements caught by the code.

What is a transfer of assets abroad?

The code applies when a ‘relevant transfer’ occurs. To counter what is regarded as an avoidance transaction, the individual who makes the transfer or who benefits from it becomes subject to income tax. The key terms are defined as follows.

Relevant transfer

A transfer is a ‘relevant transfer’ if it is a transfer of assets and as a result of the transfer and / or one or more associated operations, income from those assets becomes

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