INTM600030 - Transfer of assets abroad

Overview of ICTA88/S740

ICTA88/S740 applies where assets have been transferred abroad and an ordinary resident individual other than the transferor receives a benefit. ICTA88/S739 applies to an individual who transfers assets, or who procures or is associated with a transfer by somebody else. See INTM600020 for an overview of Section 739.

The conditions for application of Section 740 are:

• There must be a transfer of assets.
• As a result of which (alone or in conjunction with associated operations) income becomes payable to a non-resident person.
• As a result of the transfer, etc., an individual other than the transferor receives a benefit, which is not otherwise chargeable to Income Tax.
• The recipient of the benefit must be ordinarily resident in the UK in the year of charge.

Section 740 taxes non-transferors on benefits received. It often applies to beneficiaries of non- resident trusts who receive benefits or capital payments from the trustees. There are special rules where the beneficiary is not domiciled in the UK.

Benefits chargeable by Section 740 include payments of any kind, for example cash (capital distributions), the use of property (e.g. occupation of a house), interest free loans, etc. Where the conditions are satisfied, the individual receiving the benefit is liable to tax on the amount or value of the benefit, although the charge is limited by the amount of past or future available 'relevant income' of the non-resident person.

Relevant income is any income arising (on or after 10 March 1981) to a non-resident person as a result of a transfer of assets and any associated operations, which by virtue or in consequence of the transfer or associated operations can be used directly or indirectly to provide a benefit for the individual.

If the amount or value of the benefit exceeds the relevant income which has arisen up to the end of the year in which the benefit is received, the excess benefit is carried forward and taxed as income of future years as and when sufficient relevant income becomes available. Calculation of relevant income is the responsibility of CNR.