Closed call for evidence

Personal Tax Offshore Anti-Avoidance legislation

Published 30 October 2024

Summary

Aims and objectives of this call for evidence

This call for evidence seeks to understand and identify areas where the personal tax offshore anti-avoidance rules could be improved or updated. The government intends to explore options to modernise these rules to remove ambiguity and uncertainty in the legislation, make the rules simpler to apply in practice and ensure these anti-avoidance provisions are effective.

This call for evidence is the first stage to support streamlining areas of interest, before formally consulting on specific proposals for reform in 2025.

Scope of this call for evidence

The government seeks to conduct a review of personal tax offshore anti-avoidance legislation, including the Transfer of Assets Abroad and Settlements legislation, to modernise the rules and ensure they are fit for purpose.

Who should read this

We would like to hear from taxpayers, agents, representative bodies, professional bodies, businesses, education institutions and other interested parties.

Duration

The call for evidence will run for 16 weeks starting on 30 October 2024 and ending 19 February 2025.

Lead official

The lead official is Gabrielle Clarke of HM Revenue and Customs (HMRC).

How to respond or enquire about this call for evidence

Responses can be provided by submitting this form no later than 19 February 2025.

Additional ways to be involved

Further details relating to engagement and future consultations will be shared on GOV.UK in due course.

After the call for evidence

This call for evidence is the first stage of the review of personal tax offshore anti-avoidance legislation. Responses received will be evaluated, alongside other evidence, to identify areas for improvement and highlight priority areas for further consultation in 2025.

1. Introduction

1.1. Some tax advisors and industry representatives have highlighted a desire to modernise, simplify and clarify some of the rules that counter the use of personal tax offshore avoidance arrangements (the ‘offshore anti-avoidance legislation’), noting that they do not always provide clarity or certainty to taxpayers or HMRC.

1.2. On 29 July 2024, the government announced its intention to conduct a review of the offshore anti-avoidance legislation to modernise the rules and ensure they are fit for purpose. With the removal of non-domicile status from 6 April 2025, the government recognises that new offshore structures could be brought into the scope of these rules. It therefore intends to carry out a review on whether the rules are working as intended. This call for evidence marks the beginning of this process. Responses to this call for evidence will be used to inform areas which will be subject to a formal consultation in 2025.

1.3. The government seeks to better understand where there is ambiguity, undue complexity and inconsistency in the application of the offshore anti-avoidance rules in the following areas:

• Settlements legislation
• Transfer of Assets Abroad legislation
• Capital Gains Tax legislation

1.4. Whilst this review focuses on specific areas of legislation, the government welcomes wider comments and recommendations on other areas of personal tax offshore anti-avoidance legislation which could be consulted on as part of this review.

1.5. As set out on 29 July 2024, it is not anticipated that any changes to the offshore anti-avoidance legislation will be introduced before the start of the 2026 to 2027 tax year.

Settlements legislation

1.6. The Settlements legislation is at Chapter 5 to Part 5 of the Income Tax (Trading and Other Income) Act 2005 and charges Income Tax on certain income treated as the income of a settlor of a settlement (or sometimes a close family member of the settlor). It applies in various circumstances, including but not limited to both UK resident trusts and non-resident trusts.

1.7. The Settlements legislation applies to:

• settlements in which the settlor has retained an interest
• settlements on minor children or stepchildren of the settlor who are neither married nor in a civil partnership
• capital sums paid to a settlor by trustees of a settlement
• capital sums paid by a body corporate connected with the settlement
• benefits that are provided out of protected foreign-source income, and onward gifts

1.8. The legislation can apply in various situations including those involving individuals, companies and partnerships. For the purposes of the legislation, the definition of a ‘settlement’ includes any disposition, trust, covenant, arrangement or transfer of assets. A settlement may include a series of steps or transactions which taken together are regarded as an arrangement.

Transfer of Assets Abroad (ToAA) legislation

1.9. The current ToAA rules are at Chapter 2 to Part 13 of the Income Tax Act 2007 (ITA 2007). These impose a charge to Income Tax on UK resident individuals when, by means of a transfer of assets, income becomes payable to a person abroad (a relevant transfer); and the individual who made the transfer either:

• has the power to enjoy the income arising
• receives, or is entitled to receive, a capital sum which is connected with the transfer

1.10. The ToAA legislation can also apply where a UK resident individual receives a benefit as a result of a relevant transfer.

1.11. There is an exemption from charge when either the avoidance of tax was not one of the purposes of the relevant transactions (known as the ‘motive defence test’), or all the relevant transactions were genuine commercial transactions (sections 736 to 742A of ITA 2007).

Capital Gains Tax (CGT) legislation

1.12. The main personal tax CGT offshore anti-avoidance rules are at:

• section 86 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992), which attributes gains accruing to a non-resident or dual resident settlement to a UK resident settlor where the settlor has an interest in the settlement
• section 87 of, and Schedule 4C to, TCGA 1992, which deem that gains accruing to non-resident settlements accrue to UK resident beneficiaries when they receive a matched capital payment

1.13. Section 3 of TCGA 1992 also attributes gains accruing to non-resident close companies to company participators where the gain is connected to avoidance. Under section 3A of TCGA 1992, gains accruing on the disposal of an asset are treated as ‘connected to avoidance’ unless it can be shown that neither the disposal nor acquisition of that asset formed part of a scheme or arrangements with a main purpose of avoiding CGT or Corporation Tax (known as the ‘motive defence test’).

Question 1: What could be done to simplify this legislation?

Question 2: What could be done to remove inconsistencies and align this legislation?

Question 3: What are your views on how the motive defence tests are applied and what areas of these tests could be improved?

Question 4: Do you have any suggestions on how the government should approach personal tax offshore anti-avoidance legislation in these areas going forward?

Question 5: Are there any other personal tax offshore anti-avoidance provisions the government should consider as part of the consultation?

2. Assessment of impacts

Summary of impacts

Year	2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028
Exchequer impact (£m)	+/-	+/-	tbc	tbc	tbc	tbc

Exchequer Impact Assessment

Impacts	Comment
Economic impact	This measure is not expected to have significant economic impacts.
Impact on individuals, households and families	This call for evidence seeks to understand and identify areas where the personal tax offshore anti-avoidance rules could be improved or updated. The measure therefore has no direct impact on individuals at present. Any future impacts on individuals will be fully examined and detailed. The measure is not expected to impact on family formation, stability, or breakdown.
Equalities impacts	This measure has no impact on groups sharing protected characteristics. The government will, however, consider any issues raised as part of any future proposals resulting from this consultation.
Impact on businesses and Civil Society Organisations	This call for evidence seeks to understand and identify areas where the personal tax offshore anti-avoidance rules could be improved or updated. This measure therefore has no direct impact on businesses or civil society organisations at present. Any future impacts on businesses or civil society organisations will be fully examined and detailed.
Impact on HMRC or other public sector delivery organisations	There are no delivery impacts for HMRC, or other public sector delivery organisations linked with this consultation. Any future impacts on HMRC will be fully examined and detailed.
Other impacts	Not applicable

3. Summary of call for evidence questions

Question 1: What could be done to simplify this legislation?

Question 2: What could be done to remove inconsistencies and align this legislation?

Question 3: What are your views on how the motive defence tests are applied and what areas of these tests could be improved?

Question 4: Do you have any suggestions on how the government should approach personal tax offshore anti-avoidance legislation in these areas going forward?

Question 5: Are there any other personal tax offshore anti-avoidance provisions the government should consider as part of the consultation?

4. The call for evidence process

This consultation is being conducted in line with the Tax Consultation Framework. There are 5 stages to tax policy development:

Stage 1: Setting out objectives and identifying options.

Stage 2: Determining the best option and developing a framework for implementation including detailed policy design.

Stage 3: Drafting legislation to effect the proposed change.

Stage 4: Implementing and monitoring the change.

Stage 5: Reviewing and evaluating the change.

This consultation is taking place during stage 1.

How to respond

A summary of the questions in this consultation is included at chapter 3.

Responses can be provided by submitting this form no later than 19 February 2025.

Please do not send responses to the call for evidence Coordinator.

Paper copies of this document or copies in Welsh and alternative formats (large print, audio and Braille) may be obtained free of charge from the above address.

When responding please say if you are a business, individual or representative body. In the case of representative bodies please provide information on the number and nature of people you represent.

Confidentiality

HMRC is committed to protecting the privacy and security of your personal information. This privacy notice describes how we collect and use personal information about you in accordance with data protection law, including the UK GDPR and the Data Protection Act (DPA) 2018.

Information provided in response to this consultation, including personal information, may be published or disclosed in accordance with the access to information regimes. These are primarily the Freedom of Information Act 2000 (FOIA), the DPA 2018, UK GDPR and the Environmental Information Regulations 2004.

If you want the information that you provide to be treated as confidential, please be aware that, under the Freedom of Information Act 2000, there is a statutory Code of Practice with which public authorities must comply and which deals with, amongst other things, obligations of confidence. In view of this it would be helpful if you could explain to us why you regard the information you have provided as confidential. If we receive a request for disclosure of the information we will take full account of your explanation, but we cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not, of itself, be regarded as binding on HM Revenue and Customs.

Consultation Privacy Notice

This notice sets out how we will use your personal data, and your rights. It is made under Articles 13 and/or 14 of the UK GDPR.

Your data

We will process the following personal data:

Name
Email address
Postal address
Phone number
Job title

Purpose

The purposes for which we are processing your personal data is: Personal Tax Offshore Anti-Avoidance legislation.

Legal basis of processing

The legal basis for processing your personal data is that the processing is necessary for the exercise of a function of a government department.

Recipients

Your personal data will be shared by us with HM Treasury.

Retention

Your personal data will be kept by us for 6 years and will then be deleted.

Your rights

You have the right to request information about how your personal data are processed, and to request a copy of that personal data.

You have the right to request that any inaccuracies in your personal data are rectified without delay.

You have the right to request that any incomplete personal data are completed, including by means of a supplementary statement.

You have the right to request that your personal data are erased if there is no longer a justification for them to be processed.

You have the right in certain circumstances (for example, where accuracy is contested) to request that the processing of your personal data is restricted.

Complaints

If you consider that your personal data has been misused or mishandled, you may make a complaint to the Information Commissioner, who is an independent regulator. The Information Commissioner can be contacted at:

Information Commissioner’s Office
Wycliffe House
Water Lane
Wilmslow
Cheshire
SK9 5AF

0303 123 1113 casework@ico.org.uk

Any complaint to the Information Commissioner is without prejudice to your right to seek redress through the courts.

Contact details

The data controller for your personal data is HMRC. The contact details for the data controller are:

HMRC
100 Parliament Street
Westminster
London
SW1A 2BQ

The contact details for HMRC’s Data Protection Officer are:

The Data Protection Officer
HMRC
14 Westfield Avenue
Stratford
London
E20 1HZ

advice.dpa@hmrc.gov.uk

Consultation principles

This call for evidence is being run in accordance with the government’s Consultation Principles.

The Consultation Principles are available on the Cabinet Office website.

If you have any comments or complaints about the consultation process, please contact the Consultation Coordinator.

Please do not send responses to the consultation to this link.