Government consults on revision to anti tax avoidance rules for transferring assets abroad

The Government has launched a consultation on reforming anti avoidance rules for people transferring assets abroad.  The proposals are a response to objections from the European Commission that the current rules are "disproportionate" and therefore incompatible with single market principles.  In its consultation document, HMRC says that the proposed revisions aim to strike a better balance between protecting tax receipts and allowing individuals to pursue genuine economic activity across borders.   There will be a new test to identify whether transactions are for genuinely commercial activities that take place overseas, with these transactions being exempt from the rules.

 Katherine Bullock, tax partner at PwC in Leeds, said:  

"It is in the Government's interest to get these rules right as if they don't comply with EU principles tax payers can challenge them.  Tax payers themselves will want to be spared the need of having to take disputes to the EU courts.

"What the Government is trying to do is to distinguish between genuine commercial activities and artificial structures or transactions with a tax-avoidance motive.

"The revised rules build on the Government's corporate tax reforms but there are some fundamental issues that need to be ironed out through the consultation process. Critically, the question of whether the rules may still be incompatible with EC single market principles needs to be considered, given that investment activity is excluded from the proposed exemptions.

"The proposals to decide on genuine activity look like they will require detailed tax expertise.  Every person who submits a tax return and who has invested overseas will face questions only someone familiar with international tax law  will be able to answer with confidence. Taxpayers would prefer simple 'bright line' tests that do not require significant technical advice."