The Transfer of Assets Abroad (ToAA) legislation is undergoing significant changes with the introduction of new measures in the Spring Finance Bill 2024. The government is taking action to prevent individuals from exploiting companies to avoid taxes by transferring assets overseas. This move aims to close loopholes and combat tax avoidance practices that have been costing the exchequer millions.
Legislative Update: Targeting UK Resident Individuals with Closely-Held Company Interests
Effective from 6 April 2024, the revised provisions will target UK resident individuals who own or have a financial interest in closely-held companies, whether they are based in the UK or abroad. The amendments will introduce a tax charge on relevant transfers carried out through such entities to ensure compliance with the ToAA legislation.
One key aspect of the legislative update is the introduction of a new section, s720A, in Chapter 2 of Part 13 of the Income Tax Act 2007. This change will redefine what constitutes a ‘relevant transfer’ and expand the scope of taxable events involving closely-held companies. It is designed to prevent individuals from using corporate structures to evade tax liabilities and ensure transparency in financial transactions.
Tax Liabilities and Financial Transparency Regulations
Notably, these revisions will not impact genuine commercial transactions or those without tax avoidance motives, as outlined in sections 736 to 742 of the Income Tax Act 2007. The government is keen to differentiate between legitimate business activities and schemes aimed at exploiting tax loopholes for personal gain.
Tax expert Ray McCann has highlighted the significance of these amendments in light of the Supreme Court’s decision in the Fisher case. The ruling in this landmark case overturned HMRC’s assessments on the Fisher family regarding the transfer of assets related to the Stan James betting business. The court’s decision clarified the criteria for determining ‘power to enjoy’ income in cross-border transactions, providing clarity on tax liabilities in similar cases.
Overall, the changes to the ToAA legislation represent a proactive step towards strengthening tax enforcement measures and promoting tax compliance among individuals with overseas financial interests. By addressing potential tax avoidance schemes and reinforcing the integrity of the tax system, these amendments aim to create a level playing field for all taxpayers. If you are concerned about how any of the recent changes to the financial landscape might affect your assets, get in touch with one of our team of experts today.
