Changes announced in the Spring Budget and included in the Spring Finance Bill will reverse a recent Supreme Court ruling on the Transfer of Assets Abroad (TOAA) transferor provisions and expand the provisions to include transfers made by close companies. The changes will have a retroactive effect and apply to income arising to affected structures from 6 April 2024.
Broadly, the TOAA provisions treat income as arising to an individual where that individual has made a transfer of assets, as a result of which, income becomes payable to a person abroad and the individual has power to enjoy that income.
Historically, HMRC have sought to argue that where a close company makes a transfer and an individual or several individuals have a controlling interest in that company, they should be treated as ‘quasi-transferors’ and potentially taxable on an amount equal to that income. In November 2023, the Supreme Court ruled in the HMRC v Fisher and another case that where a company had made a transfer, the wording of the legislation was not sufficiently broad to allow the shareholders to be treated as quasi-transferors, regardless of the size of their shareholding. This effectively meant that where companies made transfers overseas, their shareholders would not be taxable under the TOAA provisions.