Income Tax Act 2007 section 720A

Transfers by closely-held companies

Section 720A extends the transfer of assets abroad charge under section 720 to cover situations where a closely-held company carries out a transfer to avoid tax, and an individual with a qualifying interest in that company was involved in or aware of the transfer.

• The section 720 income tax charge applies where a closely-held company makes a relevant transfer to avoid tax, provided the individual has a qualifying interest in that company and meets both the involvement and avoidance conditions.
• An individual has a qualifying interest if they (or their nominee) are a participator in the closely-held company, or in the first company in a chain of closely-held companies that leads to the company making the transfer.
• The individual is treated as involved in the company unless they can demonstrate to HMRC that neither they nor the relevant participator had any direct or indirect role in the company's decision-making.
• The avoidance condition is met where the relevant participator did not object to the transfer and it is reasonable to conclude they were, or should have been, aware of both the transfer and its tax avoidance consequences.