Income Tax Act 2007 section 727A

Transfers by closely-held companies

Section 727A extends the transfer of assets abroad income tax charge to cover situations where a closely-held company carries out a relevant transfer to avoid tax, and an individual with a qualifying interest in that company is involved in the decision-making and aware of the tax avoidance purpose.

• The existing charge under section 727 is extended to catch tax avoidance carried out through closely-held companies in which an individual holds a qualifying interest, either directly or through a nominee or chain of closely-held companies.
• Two conditions must be met: the individual must be "involved" in the company (meaning they or the relevant participator have some role in the company's decision-making), and the "avoidance condition" must be satisfied.
• The avoidance condition requires that the relevant participator did not object to the transfer and it is reasonable to conclude they knew, or should have known, both about the transfer and that one of its consequences was the avoidance of a tax liability.
• Anti-avoidance rules apply: any arrangements whose main purpose is to ensure the individual appears uninvolved in the company's decisions, or to prevent the avoidance condition from being met, must be disregarded.