Finance Bill: Changes to Transfer of Assets Abroad

Measures announced at the Spring Budget now reverse this decision, such that a transfer made by a close company may be treated as though it is made by individuals with a ‘qualifying interest’. A qualifying interest is very widely defined and includes all participators in close companies, including shareholders and loan participators. However, those who can show they are not directly or indirectly involved in the decision making of the company are excluded.

For participators who are ‘involved’, there is a purpose test (‘the avoidance condition’) which must also be met – for the provisions to apply tax avoidance must be one of the purposes for which the transfer was carried out. Even if this is the case, it may not apply if the individual can show that they objected to the transfer. However, this may be difficult to prove retroactively, particularly for transfers that took place some time ago or involved those with minority shareholdings.

Similar amendments are being made to treat those with a qualifying interest as transferors where a close company makes a transfer and the individual later receives a capital payment under the TOAA provisions.

Although the rules are designed only to reverse the decision in the Supreme Court, it appears that the provisions may actually be widened for companies which have made or are making transfers to which TOAA might apply.

This is a complex area of UK tax legislation and specialist tax advice should be sought. Please contact the authors or your usual KPMG in the UK contact to discuss further.