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HMRC internal manual

International Manual

From
HM Revenue & Customs
Updated
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Transfer of assets abroad: Overview of ITA2007/S736 - 742 - exemption from liability

See INTM600020 for an overview of the ‘Income Charge’, and INTM600030 for an overview of the ‘Benefits Charge’.

The above charges apply unless the individual who is, or would be, absent an exemption, chargeable can show that a condition for exemption is met.

For transactions effected on or before 4 December 2005 in order to be exempt, the individual must satisfy HMRC that, in relation to each transfer and associated operation, either:-

  1. avoidance of taxation was not the purpose or one of the purposes for which the transfer or any associated operation was effected;

or

  1. the transfer and any associated operations were genuine commercial transactions AND were not designed for the purpose of avoiding liability to taxation.

For transactions effected after 4 December 2005 in order to be exempt, the individual must satisfy HMRC that, in relation to each transfer and associated operation:

  1. it would not be reasonable to draw the conclusion from all the circumstances of the case, that the purpose of avoiding liability to taxation was the purpose or one of the purposes, for which the relevant transactions were effected;

or, if (a) is not met,

  1. the transfer and each of any associated operations were genuine commercial transactions and it would not be reasonable to draw the conclusion, from all the circumstances of the case, that any one or more of those transactions was more than incidentally designed for the purpose of avoiding liability to taxation.

In the context of this test `taxation’ includes any UK tax liability, for example, Inheritance Tax, Capital Gains Tax, Corporation Tax as well as Income Tax.

There is no provision for a “clearance” or other advance ruling on the application of the exemption provisions. Details of the amount considered to be exempt from charge should be entered on the Foreign Pages of the Self Assessment tax return. In the “white spaces” of the return, the individual should enter particulars of transfers and associated operations that would result in a charge absent an exemption, and provide factual details about the transaction explaining the basis for considering a condition for exemption to be met.

Where an application for exemption is included in a Self Assessment tax return consideration should be given to a referral under INTM600050 and normally before opening any enquiry into the return.

Inspectors should not, in any circumstances, offer a view to the individual or agent about an application for exemption in the absence of full particulars of the transactions involved and their effect and purpose.

In any case where it is considered that an application for exemption should not be accepted you must contact SPT Personal Tax International, Advisory Bootle before refusing the application (for example by issuing assessments/closure notices).