In HMRC v Peter, Stephen and Anne Fisher [2021] EWCA Civ 1438, the Court of Appeal (CoA) adjudged the transfer of assets abroad provisions applied to the transfer of a UK business to a Gibraltar company for two of the three shareholders. The profits of the company were subject to Income Tax. 

  • The Fisher family built up a successful betting business, Stan James (Abingdon) Limited (SJA).
  • In 1999 a direct competitor closed its UK telebetting business and relocated it to Gibraltar to take advantage of the lower betting duty which was charged at 1% rather than 6.75% in the UK. SJA concluded that without following suit and relocating to Gibraltar, the business would fold.
  • To comply with betting law a separate company was incorporated rather than running the business through a branch of the UK company.
  • Stan James Gibraltar Ltd (SJG) was incorporated in Gibraltar and the taxpayers acquired the issued shares.
  • In February 2000, the entire telebetting business of SJA was transferred to SJG at market value, as determined by independent valuers.
  • SJG paid all taxes due under Gibraltar law.
  • HMRC raised Discovery assessments against Stephen, Anne and Peter Fisher under the Transfer of Assets Abroad (TOA) provisions on the basis that:
    • There had been a transfer of assets (the business of SJA to SJG).
    • Stephen, Anne and Peter had the ‘power to enjoy’ those assets by virtue of their shareholdings.
    • The transfer had a purpose of avoiding taxation (betting duty).
  • The assessments represented the profits of SJG apportioned according to each shareholder's respective shareholdings for the years from 5 April 2001 to 5 April 2008.
  • The taxpayers Appealed the assessments contending the TOA provisions should not apply and that certain discovery assessments had not been issued correctly.

The First Tier Tribunal held:

  • Anne’s appeal was allowed as she was an Irish citizen and the TOA code was not compatible with rights granted under European Union law.
  • Stephen and Peter’s appeals against the application of the TOA code were dismissed. Appeals against some of the discovery assessments were allowed as they had not been validly issued.

Both HMRC and the taxpayers appealed to the Upper Tribunal which found:

  • The TOA code was not engaged at all as the taxpayers had not procured the transfer of assets.
  • Even if the provisions had applied, the transaction was made for non-tax avoidance reasons as it was made to save the underlying business. The 'motive defence' would have prevented the TOA code from applying if it had been engaged.
  • The TOA provisions would conflict with EU law for Anne and Stephen. 

HMRC appealed to the Court of Appeal. Two of the three judges agreed that:

  • The fact that the transfer was made by SJA and not the taxpayers did not prevent the TOA provisions from applying:
    • Parliament can be expected to have intended that the TOA provisions should apply where an individual procures a transfer without executing it as this is only part of a set of conditions for a tax charge to result.
    • Stephen and Peter procured the transfer as they were heavily involved in the active running of the business and brought about the transfer of assets to SJG by virtue of their shareholdings.
    • Anne did not procure the transfer as she was not involved in the decision making of the business.
  • Income Tax did not need to have been avoided for the TOA to apply as:
    • The TOA code does not require Income Tax (or Corporation Tax) to have actually been avoided.
    • While the legislation is aimed at preventing the avoidance of tax, it does not follow that it can only apply if tax has actually been avoided.
  • The motive defence was unavailable. While the transaction was a bona fide commercial transaction:
    • The avoidance of betting duty was one of the main purposes of the transaction. The fact that this was the means of saving the business did not mean that tax avoidance was not a main purpose of the transaction.
  • The TOA provisions were compatible with EU Law in the circumstances as Gibraltar and UK are treated as belonging to the same member state for EU law purposes.
  • The disputed discovery assessments were validly raised. The HMRC officer was not aware of an actual insufficiency of tax at the time that they received detailed letters from the taxpayers' advisers as:
    • The letters focussed specifically on the transfer of the business and
    • Whilst the letters would have made a hypothetical officer aware of the possibility that additional tax may be due, this was insufficient to make them aware of an actual insufficiency of tax.

The dissenting judge, Lord Justice Phillips, concluded that HMRC’s appeal should be dismissed on the basis that the taxpayers had not procured the transfer of assets so the anti-avoidance provisions could not apply:

  • A minority shareholder, such as the taxpayers here, unless forming a voting pact with other shareholders, has no power to procure any outcome.
  • It was illogical to regard a minority shareholder as procuring an act by the company of which they are a member simply by voting in favour of it.

Useful guides on this topic

Transfer of Assets Abroad (TOA)
What are the ToA rules? When do they apply? Is there any defence against the rules?

Discovery Assessments
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? What are your rights of appeal and defences?

How to appeal an HMRC decision
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

External links

HMRC v Peter, Stephen and Anne Fisher [2021] EWCA Civ 1438


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