INTM600620 - Transfer of assets abroad: The income charge: General conditions

Prior to 6 April 2007 the income charge was wholly contained in ICTA88/S739 with subsections (2) and (3) introducing the respective charges. Those charges are now headed,

  • “Charge where power to enjoy income” contained in sections ITA07/S720-S726, and
  • “Charge where capital sums received” contained in sections ITA07/S727-S730.

For each of the charges, the charge is stated as applying for the purpose of preventing the avoiding of liability to income tax by individuals who are UK resident by means of relevant transfers (INTM600220). However, it does not require the purpose of the transfer to be the avoiding of a liability to income tax.

In other words, one of the outcomes of a particular transfer may be that a liability to income tax is avoided, but the transfer may have taken place with another purpose in mind, for example the avoiding of a liability to capital gains tax. Nevertheless, the transaction will be caught by the transfer of assets provisions as there has been an avoidance of income tax. More about this “legislative purpose’’ can be found at INTM600700.

Income tax is charged on the amount of income treated as arising to such an individual by the provisions (see INTM600760).

The person who is liable to the charge is the individual to whom the income is treated as arising.

Where the ‘controlled foreign companies’ provisions apply in relation to the income, the amount chargeable may be reduced accordingly (see INTM600720).

An exemption from tax is provided where conditions are met (see INTM602600).

In charging any tax, the same deductions and reliefs are allowed as would have been allowed if the income treated as arising to the individual had actually been received by them (see INTM602520).