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A Supreme Court decision on the Transfer of Asset Abroad Rules

Posted on 12 December 2023

This Supreme Court unanimous decision in Fisher v HMRC [2023] UKSC 44 concerned the application of the transfer of assets abroad ("TOAA") rules to the sale of betting business by a UK company to a Gibraltar company. The Supreme Court held that liability was restricted to the transferor of assets and the charge therefore does not apply to an individual in relation to a transfer made by a company in which they are a shareholder. 

The taxpayers’ company operated a telephone betting business within the UK. Its entire business was transferred to a Gibraltar-based company which was also owned by the taxpayers. The commercial rationale for making the transfer was to avoid a demise of the business owing to the need to account for betting duty in the UK. HMRC raised discovery assessment on the individual UK tax resident taxpayers under the TOAA rules. 

The Supreme Court decided in favour of the individual taxpayers on the basis that the transfer of assets had to be made by the same individual who has the power to enjoy them and that an individual cannot be treated as a transferor of the assets where the transfer is in fact made by a company in which the individual is a shareholder.

This Supreme Court's decision means that for genuine commercial transactions which are undertaken by companies:

  • advice can be given with greater certainty as the position is now clearer;
  • the distinction between a decision by the company and a decision by the shareholder is recognised; and
  • clear documentation showing that the decision was made by the company in instances where there are cross-border transactions is key to show the shareholder is not involved. 

For genuine commercial transactions the motive defence was and remains available. However, that requires the "no tax avoidance purpose" test (avoidance of UK tax was not the purpose, or one of the purposes, of either the original transfer or any subsequent operation) is satisfied and that none of the relevant transactions was "more than incidentally designed for the purpose of avoiding UK tax". If a set of circumstances presented means that the motive defence cannot be successfully argued, it is now possible to argue, in the alternative, that the decisions taken to transfer the assets abroad were not taken by an individual but by a company, provided that is accurate. 

For further information contact: Kassim Meghjee.

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