At the Autumn Budget 2024, the government announced its intention to explore options to modernise the personal tax offshore anti-avoidance rules to remove ambiguity and uncertainty. It began the process by publishing a call for evidence on the following areas:  

• settlements legislation; 
• transfer of assets abroad (ToAA); and
• capital gains tax (CGT).   

In its response, ICAEW has welcomed the government’s review of the rules. ICAEW believes that the provisions have become unduly complex and detached from commercial reality, and that it is now time to redesign the rules to make them fit for purpose. The onus should be on establishing a set of provisions that does not penalise offshore commercially aligned investments or structures. 

ICAEW has focused its attention on the ToAA legislation, which it believes is the single most important set of anti-avoidance rules relating to income. The ToAA rules can be traced back to 1936 and were designed in an age where international trade and investment were very different from the circumstances of today.  

A regular pattern has emerged whereby the courts attempt to apply the rules to current commercial practices and the government then amends the legislation, making it more complex. An example of this is the Supreme Court decision in Fisher. This was subsequently countered by legislation included in Finance (No.2) Act 2024 (F(No.2)A 2024), which extended the charging regime to transfers made by closely held companies. 

ICAEW set out its concerns with the F(No.2)A 2024 legislation in Representation 48/24, and called for the introduction of a statutory clearance mechanism to increase certainty for taxpayers potentially within scope of the legislation. Under the current rules, taxpayers are reliant on making ‘white space’ disclosures on their returns and are uncertain if their tax return will be enquired into. 

The government says that responses to the call for evidence will be used to inform areas that will be subject to a formal consultation later in 2025.

Further information 

• Settlements legislation: Ch5, Pt5, Income Tax (Trading and Other Income) Act 2005
• ToAA: Ch2, Pt13, Income Tax Act 2007
• CGT: s3, 3A and 86-87, and Sch 4C, Taxation of Chargeable Gains Act 1992