Part 13

Tax avoidance
Chapter 2

Transfer of assets abroad

Charge where power to enjoy income

Transfers by closely-held companies
720A
1
The charge under section 720 also applies for the purpose of preventing the avoiding of a liability to taxation by means of a relevant transfer carried out by a closely-held company in which an individual has a qualifying interest.
2
But the charge only applies in those circumstances if—
a
the individual is involved in the company, and
b
the avoidance condition is met.
3
An individual has a qualifying interest in a closely-held company if the individual, or a nominee of the individual, is a participator in—
a
the closely-held company, or
b
the first closely-held company in a chain of two or more closely-held companies where each company in the chain is a participator in the next company in the chain, of which one such company is the closely-held company that carried out the relevant transfer.
4
For the purposes of this section, an individual with a qualifying interest in a company is to be treated as being involved in the company unless the individual satisfies an officer of Revenue and Customs that neither the individual nor (in a case where the individual is not the relevant participator) the relevant participator has any direct or indirect involvement in the decision making of the company.
5
The avoidance condition is met if—
a
the relevant participator did not object to the making of the relevant transfer, and
b
it is reasonable to draw the conclusion, from all the circumstances of the case, that the relevant participator was aware, or ought reasonably to have been aware—
i
of the transfer, and
ii
that one of the direct or indirect consequences of the transfer is the avoidance of a liability to taxation.
6
For the purposes of subsections (4) and (5) the “
relevant participator
” means—
a
in a case where the individual’s qualifying interest arises as a result of a nominee of the individual being a participator in a company, the nominee, or
b
otherwise, the individual.
7
Any arrangements to secure that a person has no direct or indirect involvement in the decision making of a company are to be disregarded if the main purpose, or one of the main purposes, of the arrangements is to secure that the condition in subsection (2)(a) is not met.
8
Any arrangements that would result in the avoidance condition not being met are to be disregarded if the main purpose, or one of the main purposes, of the arrangements is to secure that the avoidance condition is not met.
9
In this section—
- “
arrangements
” include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
- “
taxation
” has the meaning it has in section 737.
Pt. 13 Ch. 2 modified (for the tax year 2025-26 and subsequent tax years) by Finance Act 2025 (c. 8), Sch. 10 paras. 10(9), 11
Pt. 13 Ch. 2 applied (with effect in accordance with art. 1(2)(3) Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 21
Pt. 13 Ch. 2 applied by 1988 c. 1, s. 762ZA (as inserted (21.7.2008 with effect in accordance with Sch. 7 para. 98 of the amending Act) by Finance Act 2008 (c. 9), Sch. 7 para. 94)
S. 720A inserted (with effect in accordance with s. 22(10) of the amending Act) by Finance (No. 2) Act 2024 (c. 12), s. 22(2)