Commissioners for His Majesty’s Revenue and Customs v Fisher & Anor [2023] UKSC 44

The Fisher family transferred their telebetting business from a UK company to a Gibraltar company. HMRC sought to tax the Fishers under the transfer of assets abroad code. The Supreme Court held that section 739 ICTA 1988 only applies to individuals who actually transfer assets, not to shareholders of a transferring company.

Facts

The Fisher family (Anne, Stephen, Peter and Dianne) owned shares in Stan James (Abingdon) Limited (SJA), a UK betting company. In February 2000, SJA sold its telebetting business to Stan James Gibraltar Limited (SJG), a company also owned by the Fishers. The transfer was motivated by the significantly lower betting duty in Gibraltar (1% versus 6.75% in the UK). HMRC issued tax assessments against the Fishers under section 739 of the Income and Corporation Taxes Act 1988, seeking to treat SJG’s income as the deemed income of the Fishers, claiming substantial sums in tax despite the Fishers not having personally received equivalent amounts.

Issues

Primary Issue

Whether the transfer of assets abroad code (TOAA) in section 739 ICTA 1988 applies only to individuals who personally transfer assets, or whether it extends to shareholders of a company that makes the transfer.

Secondary Issue

If section 739 is limited to transferors, in what circumstances can shareholders of a transferring company be treated as transferors?

Judgment

Lady Rose, delivering the unanimous judgment of the Supreme Court, allowed the Fishers’ appeals and dismissed HMRC’s cross-appeal.

Section 739 Limited to Transferors

The Court held that section 739 is limited to individuals who actually transfer assets. Lady Rose agreed with Lord Wilberforce’s reasoning in Vestey v Inland Revenue Comrs [1980] AC 1148 that this was the natural meaning of the statutory language:

The reference in section 739(2) to ‘such an individual’, being the individual who has power to enjoy the income of the overseas person, requires one to consider what characteristics of the individuals referred to in section 739(1) are thereby brought into subsection (2). There is no reason to pick out one of those characteristics (the fact that the individual is ordinarily resident in the UK) and ignore the others (that they are trying to avoid liability to income tax by means of transfers of assets).

The Court rejected HMRC’s argument that section 744 (providing an apportionment mechanism) changed this interpretation, noting that section 740 specifically provides for non-transferors and imposes a less penal charge.

Shareholders Not Quasi-Transferors

The Court rejected the proposition that shareholders of a company can be treated as transferors or ‘quasi-transferors’ of assets transferred by that company:

What is, however, clear is that the shareholders of a company, even if they are also the directors, are not quasi-transferors and do not procure the transfers made by the company.

Lady Rose quoted Walton J in Pratt:

It may be stretching the words of the section – indeed, I think it is – to say ‘La Société anonyme, c’est moi’, but the elastic will have snapped long before one can say, ‘I had a hand in the transfer, therefore I made it’, or ‘I am associated with the transfer, therefore I made it.’

Implications

This judgment significantly limits HMRC’s ability to apply the transfer of assets abroad code to shareholders of companies that transfer assets overseas. The decision confirms that the TOAA code in section 739 is a penal provision that must be construed narrowly. Non-transferors who receive benefits from overseas entities may still be caught by section 740, but under a less severe regime requiring actual receipt of benefits. The Court noted that any perceived gap in the legislation should be addressed by Parliament, not by expansive judicial interpretation.

Verdict: The Supreme Court unanimously allowed the appeals of Stephen and Peter Fisher and dismissed HMRC’s cross-appeal regarding Anne Fisher. The Fishers were not transferors of the business sold by SJA to SJG and were therefore not within the charging provision in section 739 ICTA 1988.

Source: Commissioners for His Majesty's Revenue and Customs v Fisher & Anor [2023] UKSC 44