TCGA 1992 s.167 – Gifts to foreign-controlled companies

(1)[^F1147 Subject to section 167A, section 165(4)^F1147] shall not apply where the transferee is a company which is within subsection (2) below.

(2)A company is within this subsection if it is controlled by a person who, or by persons each of whom—

(a)is [^F1148not resident^F1148] in the United Kingdom, and

(b)[^F1149 is or^F1149] is connected with the person making the disposal.

(3)For the purposes of subsection (2) above, a person who (either alone or with others) controls a company by virtue of holding assets relating to that or any other company and who is resident[^F1150 in the United Kingdom is to be regarded as not resident^F1150] there if—

(a)he is regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom, and

(b)by virtue of the arrangements he would not be liable in the United Kingdom to tax on a gain arising on a disposal of the assets.

Definitions used in section 167 11

company: “company” includes any body corporate or unincorporated association but does not include a partnership, and shall be construed in accordance with section 99 ;
Defined in s.288(1) · see it in the full Act; (5) In this paragraph “company” and “group” shall be construed in accordance with section 170(2) to (9).
Defined in Sch.2 para.5(5) · see it in the full Act
the residents: (b) if 2 or more of them are then resident ... in the United Kingdom (“the residents”) it shall be treated as being as many equal capital payments as there are residents and each of them shall be treated as receiving one of the payments.
Defined in s.96(4) · see it in the full Act
resident: “resident” means resident in accordance with the statutory residence test in Part 1 of Schedule 45 to the Finance Act 2013 ;
Defined in s.288(1) · see it in the full Act
connected: (4) Section 1122 of CTA 2010 (meaning of “connected” persons) applies for the purposes of sub-paragraph (1A)(a).
Defined in Sch.7AC para.19(4) · see it in the full Act
control: Section 1124 of CTA 2010 (meaning of “control") applies for the purposes of this sub-paragraph.
Defined in Sch.5AA para.4(3) · see it in the full Act; (d) for the purposes of any attribution under section 451(4) (rights of a person's associates to be attributed to the person etc in determining “control”) the rights and powers of a person (“A”) are not to be attributed to another person (“P”) merely because A is a partner of P , and
Defined in Sch.5AAA para.46(2) · see it in the full Act; “control” shall be construed in accordance with sections 450 and 451 of CTA 2010 ;
Defined in s.288(1) · see it in the full Act
assets: (a) the reference to “assets” were a reference to “property”, and
Defined in Sch.4ZA para.22(2) · see it in the full Act
asset: In this sub-paragraph “asset” includes part of an asset.
Defined in Sch.8B para.6(1) · see it in the full Act
double taxation relief arrangements: “double taxation relief arrangements”—

(a)
in relation to a company means arrangements that have effect under section 2(1) of TIOPA 2010 except so far as they have effect in relation to petroleum revenue tax, and

(b)
in relation to any other person means arrangements that have effect under section 2(1) of TIOPA 2010 but only so far as they have effect in relation to capital gains tax;

Defined in s.288(1) · see it in the full Act
arrangements: “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and
Defined in s.16A(2) · see it in the full Act; (1) In sections 169B to 169E “arrangement” or “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.
Defined in s.169G(1) · see it in the full Act
arrangement: (1) In sections 169B to 169E “arrangement” or “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.
Defined in s.169G(1) · see it in the full Act
tax: and for the purposes of this definition “tax” means capital gains tax, corporation tax or income tax.
Defined in s.16A(2) · see it in the full Act

Cases considering section 167 3

Brian George Foulser & Anor v MacDougall (Officer of HM Revenue & Customs)

[2007] EWCA Civ 8 · 17 January 2007Limits

Provides the complementary exclusion from hold-over relief where the transferee company is within section 167(2). The appeal turned on the construction and application of that exclusion. (see paras [8]; [48]-[64]) Limits section 165(4) relief where the transferee is a company within section 167(2). (see para [8]) Applies where the transferee is controlled by a person, or persons, each non-resident and connected with the transferor. Irish Life was treated as the controlling person. (see paras [8]; [13]; [48]) Applies the non-residence condition to the person controlling the transferee company. Irish Life satisfied that condition. (see paras [8]; [13]) Interprets the connection requirement by permitting section 286(7) to establish the connection between the non-resident controlling company and the transferor. (see paras [48]-[64])

William Reeves v The Commissioners for HMRC

[2018] UKUT 293 (TCC) · 26 September 2018Interprets

The foreign-control restriction must be read so that associate attribution is limited to connected non-residents who control the transferee by virtue of holding assets relating to that or another company. A non-resident connected person with no interest in the transferee cannot trigger the restriction (see paras [89]-[96]).

Foulser & Anor v HM Inspector of Taxes

[2005] EWHC 2958 (Ch) · 20 December 2005Defines

Excludes section 165(4) relief where the transferee is a company within section 167(2). The court upheld the application of that exclusion on the unchallenged findings below. (see paras [7], [27]-[32]) Prevents hold-over relief where the transferee company is controlled by persons who are non-resident and connected with the transferor. The provision was compatible with Article 43 on the facts because the Irish insurer’s establishment rights were not engaged. (see paras [27]-[32], [68]-[80]) Provides a residence deeming rule for persons controlling a company through assets relating to that or another company. It was quoted as part of the statutory scheme, but no decision turned on it. (see para [7])

What each judgment says about section 167 is in the case-law panel in the full Act.

Amendments and notes

4 notes from legislation.gov.uk

Amendments

F1147Words in s. 167(1) substituted (with effect in accordance with Sch. 7 para. 60 of the amending Act) by Finance Act 2015 (c. 11), Sch. 7 para. 25
F1148Words in s. 167(2)(a) substituted (with effect in accordance with Sch. 46 para. 112 of the amending Act) by Finance Act 2013 (c. 29), Sch. 46 para. 100(2)
F1149Words in s. 167(2)(b) inserted (with effect in accordance with s. 41(2) of the amending Act) by Finance Act 2021 (c. 26), s. 41(1)
F1150Words in s. 167(3) substituted (with effect in accordance with Sch. 46 para. 112 of the amending Act) by Finance Act 2013 (c. 29), Sch. 46 para. 100(3)