Commissioners for His Majesty's Revenue and Customs v Fisher and another

The Supreme Court considered the scope and application of the transfer of assets abroad code (sections 739–746 Income and Corporation Taxes Act 1988). The court held that section 739(2) is directed at individuals who are the transferors of the assets that give rise to the income deemed to be theirs; it does not generally apply to persons merely because they have a shareholding in a company that effects the legal transfer. The court rejected HMRC’s contention that section 744’s apportionment power or other later statutory changes meant that section 739 should be read to tax non-transferor shareholders as if they were transferors.

The court also held that the statutory scheme provides a distinct charge for non-transferors (section 740) who receive benefits provided out of assets and that this scheme supports limiting section 739 to actual transferors. Applying those principles to the facts, the court concluded that the Fishers were not the transferors of SJA’s business sale to SJG and therefore were not within the charging provision of section 739.

Background and parties: The appeals arose from HMRC assessments charging members of the Fisher family under the transfer of assets abroad code (TOAA) in relation to the sale in 2000 of a telebetting business operated by a UK company, Stan James (Abingdon) Limited (SJA), to a Gibraltar company, Stan James Gibraltar Limited (SJG). The Fishers were shareholders and directors of SJA and shareholders of SJG. HMRC treated proportions of SJG’s income as the deemed income of UK-resident Fishers under section 739 ICTA 1988. The taxpayers appealed.

Procedural history:

• First-tier Tribunal (FTT): [2014] UKFTT 804 (TC) — treated the transfer as attributable to each of the Fishers and made findings on various years.
• Upper Tribunal (UT): [2020] UKUT 62 (TCC) — held the transfer was made by SJA, not by the individual shareholders, and allowed the Fishers’ appeal.
• Court of Appeal: [2021] EWCA Civ 1438 — majority reversed the UT in part, holding some Fishers were within the section 739 charge; one Lord Justice dissented.
• Supreme Court: [2023] UKSC 44 — final determination on the proper construction of the TOAA code and whether the Fishers were transferors.

Nature of the claim / relief sought: Appeals from the Court of Appeal and cross-appeal by HMRC concerning assessments under the TOAA code (primarily section 739) for tax years spanning 2000/01 to 2007/08.

Issues framed:

• Whether the person charged under section 739 must be the transferor of the assets which give rise to the income that is then deemed to be their income.
• If the person must be the transferor, whether shareholders of a company that effects the legal transfer can be treated as the transferors (for example as procuring the transfer or as quasi-transferors).

Court’s reasoning:

• The court analysed the statutory language of section 739(1)–(3) and related provisions (notably sections 740, 741, 742 and 744) and the relevant authorities, especially Vestey v Inland Revenue Commissioners. The majority regarded the interpretation in Vestey — limiting the charge to the person who made (or was associated with) the transfer — as the correct and natural meaning of the provision.
• The presence of section 740 (a less penal charge for non-transferors who receive benefits) reinforced the conclusion that Parliament intended section 739 to be limited to transferors rather than to sweep in all persons who later acquire a power to enjoy overseas income because a company transferred assets.
• The court rejected HMRC’s argument that section 744’s apportionment power or subsequent statutory developments meant that the criminal-liability-like severity or potential for multiple taxation identified in earlier cases had been cured so as to justify a broader construction of section 739.
• On the facts, the legal transferor was SJA and not the individual Fishers; the shareholders were not to be treated as procuring or being quasi-transferors merely by virtue of shareholdings or their positions as directors. Consequently, section 739 did not apply to them.

Subsidiary observations: The court noted the continuing penal quality of the TOAA charge where it applies, the limited role of the spousal deeming provision if the charge were extended, and the availability of section 740 and other doctrines (e.g. substance over form or abuse of corporate personality) in appropriate cases. The court declined to create new categories of quasi-transferor that would sweep in typical shareholders of bona fide companies.

Appeals by the Fishers were allowed and HMRC’s cross-appeal was dismissed. The Supreme Court held that section 739 ICTA 1988 is limited to individuals who transferred (or were associated with the transfer of) the assets that give rise to the overseas income; ordinary shareholders in a company that lawfully effects the legal transfer are not to be treated as transferors merely by reason of their shareholdings, and therefore the Fishers were not caught by the section 739 charge.

FTT: [2014] UKFTT 804 (TC) (decision attributing transfer); Upper Tribunal: [2020] UKUT 62 (TCC) (held transfer was by SJA, allowed taxpayers' appeal); Court of Appeal: [2021] EWCA Civ 1438 (majority allowed HMRC’s appeal in part); Supreme Court: [2023] UKSC 44 (allowed the Fishers’ appeals and dismissed HMRC’s cross-appeal).