INTM601560 - Transfer of assets abroad: The benefits charge: Receives a benefit

One of the conditions for the benefits charge is that the individual receives a benefit (INTM601480). However, ‘benefit’ is not defined for the purpose of this charge, although prior to April 2007 it was said to include ‘a payment of any kind’.

If the individual is, apart from the benefits charge, otherwise chargeable to income tax on the amount or value of the benefit, then the benefits charge cannot apply ITA07/S731.

Before 6 April 2017, there was no guidance within the legislation on what the ‘amount or value’ of a benefit was for the purpose of calculating the amount of a benefits charge.

With effect from 6 April 2017, Finance (No.2) Act 2017 inserted sections ITA07/S742B-742E. These sections provide rules around the valuation of certain benefits provided by way of

• a payment by way of a loan,
• making movable property available, and
• making land available.

INTM601580 considers what is a ‘benefit’ and INTM601600 considers what the amount or value of a benefit is for the purpose of the benefits charge. The changes addressing the valuation of certain benefits from 6 April 2017 are discussed from INTM603620 onwards.

There must be an individual who receives a benefit. More is said about the individual at INTM601680. No charge can arise under these provisions because an individual may at some future date become entitled to receive a benefit. It may be the case that an individual receives a benefit even though nothing has, at first glance, been received directly. Whether a benefit is received is a question of fact.

Examples of an indirect benefit are where a debt of the individual is settled by the person abroad, or alternatively where the person abroad settles expenses on the individual’s behalf. This is typically seen where the trustees of a trust pay a child’s school fees on behalf of the individual or pay the individual’s rent. In more sophisticated arrangements, benefits may be disguised or provided by circuitous routes to conceal the fact.

There are several areas of tax legislation where the receipt of a benefit can result in a tax charge, for example employment income legislation and certain capital gains provisions (like defining a ‘capital payment’ in TCGA92/S97 mentioned at INTM601520). Where a benefit is received it will be appropriate to have regard to any other provisions that may result in a tax charge from the receipt of such a benefit.

For example, where a benefit is provided by a foreign company, it may be appropriate to consider whether the individual can be regarded as a ‘shadow director’ of that company, and as a result chargeable to income tax under employment income rules in respect of any benefit received.

There is no direct correlation between what is a benefit for one purpose with what may be a benefit for the purpose of the benefits charge. However, it is likely that where a benefit would be considered to arise for one purpose, unless it is by specific legislation deeming a benefit to arise for that purpose, similar circumstances would also give rise to a benefit for the purpose of the benefits charge.