Transfer of assets abroad rules

The transfer of assets abroad rules in sections 714 to 751 of the Income Tax Act 2007 tax a UK resident individual on income that arises to a person abroad, such as an offshore company or trust, because of a transfer of assets. The charge applies if the individual can enjoy that income or receives a capital sum, and a separate charge catches other UK residents who receive benefits. There is no charge if the individual satisfies HMRC that the transactions had no tax avoidance purpose or were genuine commercial transactions.

What are the rules trying to stop?

HMRC’s International Manual (INTM600120) explains the logic. The UK taxes its residents on their worldwide income, but a non resident is generally not taxed on foreign income. Without special rules, a UK resident could move assets to a non resident company or trust, let the income build up there and still benefit from it. The legislation was first enacted in 1936 to stop this and is now in Chapter 2 of Part 13 of ITA 2007.

There are three charges:

the power to enjoy charge (section 720), on the transferor who can enjoy the income of the person abroad;
the capital sum charge (section 727), on the transferor who receives or is entitled to a capital sum connected with the transfer;
the benefits charge (section 731), on other UK residents who receive a benefit out of the assets.

What has to be present before a charge can arise?

INTM600160 lists the basic features: a relevant transfer; income becoming payable to a person abroad as a result of it, alone or with associated operations; an individual who is the subject of the charge; and that individual being UK resident for the year.

A “person abroad” is a person resident outside the UK (section 718). That includes companies, trustees and individuals. From 6 April 2012 a company is a person abroad only if it is resident outside the UK, and trustees and personal representatives treated as non resident under sections 475(3) and 834(4) count (INTM600360).

The individual does not need to have been UK resident when the transfer was made. Section 721(5)(b) says it does not matter whether they were resident in the year of transfer, and section 721(5)(c) says it does not matter whether avoiding income tax was a purpose of the transfer. Moving to the UK with an existing offshore structure can therefore bring it into charge (INTM600780).

When does someone have power to enjoy the income?

Section 722 treats the individual as having power to enjoy if any of the five enjoyment conditions in section 723 is met:

Condition A: the income is dealt with so as to benefit the individual at some time, in any form.
Condition B: receipt of the income increases the value of assets the individual holds or that are held for them, such as shares in the offshore company.
Condition C: the individual receives or is entitled to receive a benefit out of the income or related money.
Condition D: the individual may become entitled to the income if powers are exercised, whoever holds them.
Condition E: the individual can control, directly or indirectly, how the income is applied.

Section 722(3) requires regard to the substantial result and effect of all the transactions, and section 722(4) says every benefit counts whatever its form and whether or not the individual has legal rights to it. Where the conditions are met, section 721 treats income equal to the income of the person abroad as arising to the individual, provided it would be taxable if it were theirs and received in the UK. There is no double charge where the individual has already paid tax on that income under another provision (section 721(3C)).

How does the capital sum charge work?

Section 729 defines a capital sum as any loan or repayment of a loan, and any other sum paid otherwise than as income and not for full consideration. A sum paid to someone else at the individual’s direction, or under an assignment, counts as the individual’s. An earlier loan is ignored if it was wholly repaid before the tax year begins.

HMRC notes that once a capital sum has been received, the charge continues for later years in which there is income, with no further receipt needed. In the first year, the whole of that year’s income is potentially chargeable, not just income after the receipt (INTM600660).

Illustration only. Sarah, UK resident, transfers an investment portfolio to a Jersey company she owns. The company earns and keeps £40,000 of income a year. Condition B and Condition E are both met, so £40,000 a year is treated as her income under section 720 unless she qualifies for an exemption. If the company later lends her £50,000, that loan is a capital sum and the section 727 charge can also apply.

Who is caught by the benefits charge?

Section 732 applies to a UK resident who receives a benefit out of assets available because of a relevant transfer, where they are not chargeable under the transferor charges. Section 733 sets six steps that match total untaxed benefits against the “relevant income” of the person abroad, current and accumulated. The amount taxed is the lower of the two, so a benefit is taxed only to the extent there is income in the structure to match it. This is the charge that can reach family members who use a trust’s property or receive payments from it.

How are transfers by companies caught after Fisher?

In Fisher [2023] UKSC 44 the Supreme Court held that a transfer by a company could not be treated as made by its individual shareholders unless the arrangements were contrived. Section 22 of the Finance (No. 2) Act 2024 responded with new sections 720A and 727A, effective for income arising from 6 April 2024 whenever the transfer took place (INTM600825).

A charge can now arise on an individual with a qualifying interest in a closely held company, meaning they or their nominee are a participator in it or in the first company of a chain (INTM600830). A closely held company is a close company or a non resident company that would be close if resident. The individual must also be involved in the company and the avoidance condition must be met. Our guide to close company rules explains participators.

What changed from 6 April 2025?

With the end of the remittance basis, a UK resident chargeable under section 720 is taxed on all the income of the person abroad, UK and foreign, as it arises (INTM603635). The trust protections for non domiciled settlors were removed, so a UK resident settlor with power to enjoy is taxed on trust income as it arises. HMRC’s example is a Guernsey company receiving £100,000 a year: the shareholder escaped charge as a remittance basis user until 2024 to 2025 but is assessable on the full £100,000 from 2025 to 2026, with a right under section 725A to recover the tax from the company.

Qualifying new residents can claim the four year FIG regime, which relieves foreign income that would otherwise be taxed under these rules (INTM603625). The separate exemption for genuine transactions protected by EU treaty freedoms was repealed from 6 April 2025 (INTM600120).

How does the motive exemption work?

For transactions after 4 December 2005, section 737 removes the charge if the individual satisfies an HMRC officer that either:

Condition A: it would not be reasonable to conclude that avoiding tax was the purpose, or one of the purposes, of the transactions or any of them; or
Condition B: all the transactions were genuine commercial transactions and none was more than incidentally designed to avoid tax.

Section 738 defines a commercial transaction as one carried out in the course of a trade or business, on arm’s length terms, of a kind independent persons would enter into. Managing your own investments counts only where the parties are unconnected. The purposes of anyone who designs, effects or advises on the transactions are taken into account (section 737(5) and (6)), and “taxation” includes any tax HMRC collects, including National Insurance. HMRC applies the test to each and every relevant transaction (INTM602700), and exemption claims go to a specialist team rather than local offices (INTM602620). Older transactions use the test in section 739.

What information can HMRC demand, and what goes wrong?

Section 748 allows an officer to require particulars by notice, giving at least 30 days. A lawyer is not treated as taking part in a transaction merely by advising on it. This sits alongside HMRC’s general powers under Schedule 36.

Common mistakes include:

assuming a structure set up before moving to the UK is outside the rules;
thinking a non tax reason is enough, when any tax avoidance purpose in any transaction can defeat Condition A;
forgetting family members who receive benefits;
overlooking loans from the structure, which are capital sums.

Unreported income from an offshore structure is an offshore matter, so higher offshore penalties can follow. HMRC’s Worldwide Disclosure Facility guidance specifically lists these rules among the provisions to consider before disclosing.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.