HMRC is to consult on some aspects of proposed reforms to the Transfer of Assets Abroad (ToA) rules and the guidance which it has developed to explain the new elements of the anti-avoidance legislation.
The move follows feedback to an initial consultation on changes to the ToA legislation following Budget 2012. This looked at whether proposed amendments were compatible with European Union law, certain clarification changes, and whether any other changes were required.
After this, the Finance Act 2013 introduced a new exemption and two new clarification rules, on double charging and double taxation treaties. However the third clarification proposal, to change the rules for matching the benefit received by a UK resident individual to the income of a person abroad under the benefits charge, has not yet been implemented because of concerns raised during the consultation.
HMRC is now seeking views on the proposed changes to these 'matching rules', which are set out in section 731 of current legislation.
HMRC says the proposals are based on the approach taken by the capital gains matching rules, and are designed with the aim of providing more certainty for taxpayers while not providing an opportunity for manipulation of ordering or timing so that benefits received by UK resident individuals fall out of charge.
The first consultation showed that while commentators were broadly in favour of the clearer, more certain rules, there were concerns that they did not give an equitable outcome in some circumstances, with particular problems raised over issues of timing and allocation of relevant income. In general, respondents said that the rules were complex and difficult to operate, and that there was a difficult balance to be struck in achieving a fair and proportionate outcome while minimising complexity.
The latest consultation asks respondents to reply to a set of eight questions on these issues. It also requests feedback on HMRC's draft guidance, which the department says is much more comprehensive than previously. It is intended to address concerns over how HMRC interprets and applies terms such as 'associated operation' and 'transfer', as well as the new rules governing exemptions.
The consultation on both the changes to the matching rules and the draft guidance to ToA regulations closes on 10 October 2013 and responses should be emailed to HMRC at [email protected]
