In the long-anticipated judgment of HMRC v Fisher [2023] UKSC 44 (21 November 2023), the Supreme Court held that the transfer of a business to Gibraltar was not caught by the Transfer of Assets Abroad rules as the transfer was not made by the individual shareholders but rather by their UK company.
This ruling against HMRC’s expansion of the Transfer of Assets Abroad rules to cover transfers made by a company provide some much-needed comfort to family businesses.
The Fisher family were shareholders in a UK betting company. As the company branched into tele-betting, they decided to carry on this part of the trade from Gibraltar, for reasons of tax efficiency. The tele-betting business was therefore transferred from the UK company to a Gibraltar company.
HMRC sought to tax the Fishers on the income of the Gibraltar company under the Transfer of Assets Abroad rules, on the basis that they had the power to enjoy the income of the Gibraltar company.
In the First-Tier Tribunal, it was held that the Fishers were “transferors” and therefore caught by the Transfer of Assets Abroad rules (though one family member, Anne, successfully appealed on a point of EU law).
The Upper Tribunal disagreed and held that the rules did not apply as the family members did not affect the transfer personally.
In the Court of Appeal, it was held that since the family were involved in the decision-making of the business, they were “quasi-transferors”, so the rules applied.
Finally, the case went to the Supreme Court. The Supreme Court held that, for the rules to apply, the transfer of assets has to be made by the individual transferors who then have the power to enjoy the income of the person abroad.
It was held that an individual’s family members cannot be treated as transferors by virtue of being shareholders in the company which made the transfer. This would still be the case for majority shareholders and directors of the company.
It was also held that a taxpayer cannot avoid the rules by simply transferring income-generating assets to a UK company prior to the transfer abroad.
After ten long years through the courts, the Fishers’ appeals were allowed.
The Supreme Court was highly critical of HMRC’s general approach to the Transfer of Assets Abroad rules, and in particular their argument that taxpayers’ uncertainty about whether the rules applied to them should be regarded as something positive.
As the judgment notes, the Transfer of Assets Abroad rules are some of the most fiendishly complex and least understood UK tax rules. It is hardly surprising that the court has reached a different judgment at each stage. It remains to be seen whether the Government will implement legislation to counter the result of this case in Finance Bill 2024.
The Birketts View
This case offers some much needed and long-awaited certainty to family businesses that where a UK company set up for commercial reasons and carrying on a trade transfers assets to an overseas entity, the shareholders of the UK company are not the transferors for the purposes of the Transfer of Assets Abroad rules, even in the case of majority shareholders.