INTM600460 - Transfer of assets abroad: General conditions: The individual

The transfer of assets provisions bring a charge to income tax for individuals only. In order to be chargeable under either the income or benefits charge for periods up to 5 April 2013, the individual must have been ordinarily resident in the UK for the tax year of charge. For periods from 6 April 2013, the individual must be resident in the UK in the tax year of charge.

It will be necessary to look in more detail at the individual in the context of the separate income and benefits charges. But in each instance the provisions are concerned with the individual who is potentially subject to the tax charge for the particular tax year.

For the purposes of the transfer of assets provisions, references throughout the legislation to an ‘individual’ include their spouse or civil partner (ITA07/S714(4)). This widespread definition was first introduced before the advent of Independent Taxation and at a time when husbands and wives were broadly considered as one for tax purposes. It is important to consider what this wide definition of an individual means in the context of the provisions.

In general (unless there are wider arrangements), HMRC will not use the transfer of assets legislation to charge tax on one spouse or civil partner in respect of the income arising to the other, where that spouse or civil partner has made a transfer of assets but is, for example, outside the charge because they are a remittance basis user.

In effect the general approach will be to apply the word individual (where the individual has a spouse or civil partner) in a way that is consistent with the individual who has the power to enjoy income of a person abroad, entitlement to a capital sum, or who receives a benefit as a result of relevant transactions. But it may be equally valid in this context to use the term in a way that is consistent with an individual who, by means of relevant transactions, seeks to avoid a liability to income tax.

Where spouses or civil partners are in some way connected with relevant transactions and the results of such transactions, regard will be had to the particular facts where the extended meaning of individual may impact upon the potential charge.

Example

Mrs A is UK resident but not UK domiciled and is also a remittance basis user. She is married to Mr A, who is both UK resident and domiciled.

Mrs A has owned foreign investments for a number of years and she decides to transfer these investments to an overseas company in exchange for shares in the offshore company. Mrs A is a remittance basis user who, although potentially liable to tax on the income of the overseas company under ITA07/S720, will not be liable unless the income of the company is remitted to the UK.

As the relevant transfer is not part of a wider arrangement and Mr A does not have the power to enjoy the income of the overseas company, HMRC would not seek to assess him under ITA07/S720 as the spouse of Mrs A.