Transfer Of Assets Abroad

These pages give a non-statutory outline of the subject. For fuller information see the legislation itself. You will find further information about Inland Revenue interpretations of this legislation by clicking on Tax Bulletin Article of April 1999.

These pages offer general guidance on how the Inland Revenue will apply the rules. But the rules are complex and the way in which they apply in a particular case will depend on all the facts of that case.


Section 739 Investigation Group

Sections 739-746 ICTA 1988 are anti-avoidance provisions designed to counter the effect of certain transactions involving transfers of assets abroad.

The Section 739 Investigation Group, within HMRC Residency, is responsible for operating the provisions.

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Key Features - Section 739 ICTA 1988

Section 739 may apply where individuals transfer assets abroad in such a way that they are able to benefit from income from the assets in an (otherwise) non-taxable way.

Section 739 imposes an income tax charge on an individual where the following conditions are satisfied:

  • the individual transfers, or is associated with the transfer of, assets and
  • by virtue or in consequence of the transfer (either alone or in conjunction with associated operations), income becomes payable to a person resident or domiciled outside the UK and
  • the individual (while ordinarily resident in the UK) has the `power to enjoy' that income and/or receives, or is entitled to receive, a capital sum .

Income which becomes payable to the offshore person is deemed to be that of the UK resident individual for all purposes of the Income Tax Acts.


Key Features - Section 740 ICTA 1988

Section 740 extends the income tax charge to non-transferors. It applies where assets are transferred abroad and individuals other than the transferor receive a benefit.

Section 740 imposes an income tax charge on an individual who is ordinarily resident in the UK, where the following conditions are satisfied:

  • there is a transfer of assets and
  • by virtue or in consequence of transfer (either alone or in conjunction with associated operations), income has become payable to a person resident or domiciled outside the UK and
  • an individual ordinarily resident in the United Kingdom receives a benefit (which includes a payment of any kind) provided out of assets which are available as a result of the transfer and
  • the individual is not liable under Section 739 by reference to the transfer and
  • the benefit is not otherwise chargeable to income tax.

Section 740 charges the value of the benefit received to the extent that it is matched by the past or future "relevant income" of the non-resident person. "Relevant Income" is any income which arises to a person resident or domiciled outside the UK and which by virtue or in consequence of the transfer or associated operations can be used for providing or enabling a benefit to be provided for an individual.


Exemption from Sections 739 and 740

Section 741 ICTA 1988 provides that sections 739 and 740 will not apply if the individual satisfies the Board of Inland Revenue that

  • avoidance of tax was not the purpose or one of the purposes for which the transfer or associated operations were effected, or
  • the transfer or associated operations were bona fide commercial transactions and were not designed for the purpose of avoiding tax.


Non-Domiciliaries

Individuals who are ordinarily resident but not domiciled in the United Kingdom may be assessable under Section 739 or 740. However the legislation restricts the liability of a non-domiciled individual, broadly applying a "remittance basis" to income and benefits received outside the UK.


No Duplication of Charge

Section 744 ICTA 1988 provides that no amount of income shall be taken into account more than once in charging tax under the provisions of sections 739 and 740.

Where more than one person can be potentially assessable under sections 739 / 740, the Inland Revenue will seek to agree a "just and reasonable" division of liability.


Power to obtain information

Section 745 ICTA 1988 gives the Board of Inland Revenue extensive formal powers to obtain information. The Board may, by notice in writing, require any person to supply such particulars as they think necessary for the purposes of the legislation. Penalties are exigible under S98 TMA 1970 for failure to comply.


Returning S739 / S740 income

Income chargeable under Sections 739 and 740 goes on the Foreign Pages - SA106 of the Return, at page F2. See Notes on Foreign Pages - SA106 (Notes) at pages FN10 and FN11.


Contacting HMRC Residency

If you have any questions on this topic, you can contact us on the telephone number below.

if calling from the UK

0151 472 6228

if calling from outside the UK

+44 151 472 6228

E-mail
If you e-mail us, we will endeavour to answer your query as quickly as possible and aim to let you have a response within ten working days. Please note that Internet e-mail is not secure. This means we will reply by e-mail only where we feel your confidentiality will not be breached. Otherwise, we will e-mail you to explain that we will be replying fully by letter or telephone.

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