Introduction: Why Transfer of Assets Abroad Rules Now Reach Americans in Britain
The transfer of assets abroad code is the UK anti-avoidance regime that taxes a UK resident on income arising to an offshore company or other person abroad, as though that income were their own. It was first enacted in 1936, and it now sits in Chapter 2 of Part 13 of the Income Tax Act 2007. Furthermore, it has been rewritten twice in three years, and both rewrites widened it.
Wealthy Americans in Britain walk into this code constantly. Typically, a US citizen sets up an investment company in Delaware, the British Virgin Islands or Luxembourg long before moving to London. Consequently, they assume the company is a US problem only. In fact, once they become UK resident, HMRC can charge them personally on everything that company earns.
At TaxYork, we prepare US and UK returns for fund partners, company owners and private investors who hold offshore structures. This guide explains how the transfer of assets abroad charges work, what changed in 2024 and 2025, which defences survive, and how the code collides with the American rules on controlled foreign corporations. For the position of a new arrival who has not yet set up a structure, read our companion guide to the transfer of assets abroad rules for Americans in Britain.
What the Transfer of Assets Abroad Code Actually Does
The code attacks a simple idea: moving an income-producing asset out of the UK tax net while keeping the benefit of it. Specifically, section 720 charges you on income arising to a person abroad where you have "power to enjoy" that income as a result of a relevant transfer. Moreover, the charge is annual and automatic, and it applies to the company's income whether or not a penny reaches you. Therefore, the transfer of assets abroad rules can tax you on money you never touched.
Who Should Read This Guide
This guide is written for US citizens, green card holders and dual nationals who are UK resident and who own, fund or benefit from a non-UK company. Additionally, it matters to anyone who sold a business into an offshore holding structure before moving to Britain. Notably, nothing in the statute requires you to have been UK resident when the transfer happened; section 721 tests your residence in the tax year the income arises.
The Three Charges Inside the Code
The transfer of assets abroad code contains three separate charges. Consequently, advisers who check only the first one routinely miss the others.
The Section 720 Income Charge and "Power to Enjoy"
Section 720 of ITA 2007 charges income tax on income treated as arising under section 721. Three conditions apply. Firstly, you must have power to enjoy the income of the person abroad. Secondly, the income would have been taxable had it been yours and received in the UK. Thirdly, under condition C, you must be UK resident for the tax year.
Critically, section 721(3B) sets the amount charged as the whole income of the person abroad. Therefore, the charge is not measured by what you receive; it is measured by what the company earns. Power to enjoy is defined broadly, and it includes benefits you can obtain only later.
The Section 727 Capital Sums Charge
Section 727 catches a different route into the transfer of assets abroad charge. Here, you receive or become entitled to receive a capital sum connected with the transfer, such as a loan back from the structure. Accordingly, the company's income is treated as yours even though the money reached you as capital rather than income. In our experience, director's loans and "repayments" of shareholder advances trigger this charge more often than anything else.
The Section 731 Benefits Charge for Non-Transferors
Section 731 reaches people who never transferred anything. If you receive a benefit from the structure, section 733 matches that benefit against a pool of relevant income. Consequently, adult children and spouses who simply use a company-owned flat or receive school fees can be taxed. Furthermore, Finance Act 2025 rewrote these provisions for 2025-26 onwards, which changed the matching mechanics for many families.
What Counts as a Relevant Transfer
The building blocks are deliberately wide. A transfer includes creating rights, and "assets" covers property or rights of any kind. Furthermore, the code catches "associated operations", meaning later steps that were not part of the original transfer at all. Consequently, refinancing a company, adding a subsidiary or moving a portfolio between custodians can pull an old arrangement back into the transfer of assets abroad net decades later.
Who Counts as a Person Abroad
A person abroad is any non-UK resident person, so companies, partnerships and foreign institutions all qualify. Notably, the recipient need not sit in a tax haven. Therefore, a Delaware corporation, an Irish holding company and a Swiss partnership all engage the same analysis, and the transfer of assets abroad charge applies regardless of the rate of tax the recipient pays locally.
What Changed in 2024, 2025 and What Comes Next
Three changes have transformed the practical reach of the transfer of assets abroad landscape. Each one made the code harder to escape.
Companies No Longer Break the Chain
In *Fisher v HMRC* [2023] UKSC 44, the Supreme Court held that shareholders of a company that transferred a business abroad were not themselves the transferors. You can read the judgment at the National Archives case law service. Parliament reversed that result within months, and the Chartered Institute of Taxation briefing tracked the legislation through Parliament. Consequently, section 720A now deems an individual with a qualifying interest in a closely-held company to be the transferor where the company makes the transfer.
Two tests then apply. The individual must be "involved in the company", which is presumed unless you satisfy HMRC that you had no direct or indirect involvement in its decision making. Additionally, the avoidance condition must be met. Importantly, the rule follows chains of close companies, and it covers non-UK companies that would be close if they were UK resident. Practitioners criticised the breadth of the test, as the ICAEW analysis records. HMRC's policy paper on the amendments confirms it applies to income arising on or after 6 April 2024.
Abolishing Non-Dom Status Made the Charge Worldwide
Before 6 April 2025, a non-domiciled resident could often keep foreign income of the structure outside the charge. However, HMRC's manual at INTM603635 confirms that a UK resident charged under section 720 is now assessable on all income arising to the person abroad, both UK source and foreign source. Moreover, the old trust protections went at the same time. As a result, the transfer of assets abroad charge is now a worldwide charge for almost everyone.
The EU Defence Has Been Repealed
Here is the change almost every competing guide still gets wrong. Section 742A, the exemption for genuine transactions introduced after the EU law challenges, was omitted for 2025-26 and later years by Finance Act 2025, Schedule 12, paragraph 48. Therefore, the defence that many structures were built to rely on simply no longer exists. Guides written before 2025 still describe it as available.
The Reform Still In Progress
The government ran a call for evidence on offshore anti-avoidance legislation from 30 October 2024 to 19 February 2025, covering this code, the settlements rules and the related capital gains provisions. Consequently, further change is coming, and any structure reviewed today should be tested against the direction of travel rather than the current text alone.
The Structures That Trigger the Code Most Often
Certain arrangements appear again and again in our transfer of assets abroad casework. Notably, none of them was built to avoid UK tax, because most predate any thought of moving to Britain.
The Pre-Arrival Investment Company
An American executive consolidates a portfolio into a BVI, Cayman or Jersey company years before a London posting. Consequently, the company earns interest, dividends and gains outside anyone's UK return. Once residence begins, however, section 721 attributes that income to the individual annually. In our experience, this is the most common transfer of assets abroad exposure among relocating US clients.
The Delaware LLC That Britain Treats as a Company
HMRC generally regards a US limited liability company as opaque, even where the IRS ignores it. Therefore, an LLC funded with transferred assets is a person abroad for these purposes. Furthermore, the mismatch means the American owner reports the income directly while HMRC applies the transfer of assets abroad analysis to the same profits through a different door.
The Family Company Holding a London Property
Offshore companies still hold British homes, despite the annual charge on enveloped dwellings. Where such a company receives rent, the code can attribute that rent to the individual who funded it. Additionally, a family member who lives in the property rent-free may face the section 731 benefits charge instead, which catches people who transferred nothing at all.
The Corporate Transfer After Fisher
A US S corporation or family company moves an asset into an offshore subsidiary. Previously, the shareholders escaped, because the company rather than they made the transfer. Since 6 April 2024, however, section 720A deems participators in a closely-held company to be transferors. Consequently, corporate layers no longer insulate the individual behind them.
The Defences That Still Work
Two statutory defences against the transfer of assets abroad charges remain, plus one relief for recent arrivals. However, the burden sits on you, not on HMRC.
Condition A: No Tax Avoidance Purpose
Under section 737, you escape the charge if you satisfy an officer of HMRC that it would not be reasonable to conclude that avoiding liability to taxation was a purpose of the transactions. Notably, "taxation" is not limited to UK tax. Furthermore, the purposes of other people involved count too, which frequently defeats claims built solely on the client's own intentions.
Condition B: Genuine Commercial Transactions
Condition B requires every relevant transaction to be a genuine commercial transaction that was not more than incidentally designed to avoid tax. Crucially, section 738 provides that making and managing investments counts as a trade or business only in narrow circumstances. Therefore, a passive investment holding company rarely qualifies, however commercial its origins felt.
The FIG Regime for Recent Arrivals
Sections 726 and 730 treat deemed income as "foreign" for someone entitled to claim relief as a qualifying new resident. Accordingly, an American in their first four UK tax years can claim under the four-year foreign income and gains regime and remove the charge on foreign income of the structure. HMRC confirms this at RFIG45400. Nevertheless, the claim costs your personal allowance, must be made annually on the return, and expires after four years. We explain the wider trade-offs in our guide to the FIG regime trap for US citizens.
What the Charge Actually Costs
Quantifying the exposure matters more than debating whether the transfer of assets abroad code theoretically applies. Accordingly, we model the cash position first.
Rates, Character and the Missing Allowance
Income treated as arising under the code is charged as your income for the tax year. Therefore, an additional-rate taxpayer generally pays 45% on interest-type income, while dividend-type income carries the UK dividend rates of 10.75%, 35.75% and 39.35% for 2026-27. Moreover, the attributed income counts towards your adjusted net income, so a transfer of assets abroad charge can strip the personal allowance and taper the pension annual allowance at the same time.
The Deductions and Reliefs You Can Still Claim
Section 746 preserves the deductions and reliefs you would have received had the income actually been yours. Consequently, expenses that reduce the company's income generally reduce the attributed amount too. Furthermore, section 721(3C) prevents a second charge where another provision has already taxed the same income and that tax has been paid.
Why the CFC Reduction Rarely Helps
Section 725 reduces the transfer of assets abroad charge where the UK controlled foreign company rules have taxed the same profits. However, the UK CFC regime applies to corporate shareholders under Part 9A of TIOPA 2010, not to individuals. Therefore, an American who owns the company personally almost never benefits from that reduction, and the full charge stands.
Capital Gains Sit in a Separate Regime
This is an income tax code. Consequently, gains realised inside the offshore company fall under different attribution rules, and an adviser who clears the income position has answered only half the question. Our guide to members' voluntary liquidation for American owners covers what happens when such a company is wound up.
Where the American Side Collides
No competing guide covers this, yet it decides whether a transfer of assets abroad charge costs you 45% or something closer to 70%. Your US treatment of the same company decides whether the transfer of assets abroad charge produces a credit or a cash loss.
When the Offshore Company Is a Controlled Foreign Corporation
If US shareholders own more than half the company, section 957 makes it a controlled foreign corporation. Consequently, passive income is taxed to you annually as subpart F income, and active profits fall under the net CFC tested income rules in section 951A. Helpfully, both systems then tax the same income in the same year. Therefore, the UK tax you pay under the transfer of assets abroad charge usually credits against the American liability on your Form 1116, and the higher UK rate wins.
You must still file Form 5471 every year. Furthermore, a section 962 election can reshape the arithmetic entirely, as our guide to the section 962 election for US owners of UK companies explains.
When It Is Not a CFC: The PFIC and Timing Problem
A minority interest in a foreign investment company is usually a passive foreign investment company instead. Consequently, America often taxes you only when distributions or disposals occur, while Britain charges you every single year. That mismatch is where genuine double taxation happens, because the UK tax was paid in years when no US tax arose, and the foreign tax credit rules and IRS Publication 514 leave nothing to offset. Accordingly, a mark-to-market or qualified electing fund election should be modelled before, not after, the UK charge lands.
Check the Box, and What HMRC Sees
Electing to treat the company as disregarded for US purposes aligns the two timings neatly, because America then taxes the income as it arises. However, HMRC still sees a company, so the transfer of assets abroad analysis is unchanged. Additionally, the election creates its own reporting, and it cannot be unwound for five years. Our analysis of US LLCs and hybrid entity mismatches covers the mirror-image problem.
Case Study: A $12 Million Portfolio Company
Consider an illustrative client we will call Daniel. He is a US citizen and a private equity principal who moved to London in 2021. In 2019, he transferred a $12 million bond portfolio into a British Virgin Islands company that he wholly owns. For simplicity, we assume the portfolio yields $600,000 of interest a year and use a rate of $1.32 to the pound.
The UK Position
Daniel has power to enjoy the company's income, and he is UK resident, so the transfer of assets abroad charge applies in full. Therefore, section 721 treats the full $600,000, or £454,545, as his income each year. At the 45% additional rate, the UK tax is £204,545, roughly $270,000. Notably, he received no distribution at all. His first four UK years could have been sheltered by a FIG claim, but nobody made one, and that window has now closed.
The US Position and the Credit
The company is a controlled foreign corporation, so the interest is subpart F income taxed to Daniel annually at 37%, or $222,000. Because the UK tax exceeds it, his Form 1116 credit wipes out the US charge and leaves about $48,000 of excess passive-basket credit to carry forward. Consequently, the structure costs 45%, not 82%, purely because the timing matched.
What the Non-CFC Version Would Have Cost
Now change one fact. Suppose Daniel owns 30% alongside unrelated non-American investors. The company is then a PFIC rather than a CFC. Britain still charges him each year on his share of the income, yet America charges nothing until a distribution. When the distribution finally arrives, the excess distribution rules apply an interest charge, and the UK tax paid years earlier is long gone. In that version, the same portfolio produces genuine double taxation of roughly $180,000 over five years.
Planning Moves That Still Work
Something can usually be done about a transfer of assets abroad exposure, provided you act before HMRC opens an enquiry. Therefore, the review should start with the cheapest options.
Claim Every Year That Remains Open
If you are within four years of arriving, the qualifying new resident claim is worth more than any restructuring. Additionally, the claim is made source by source on the return, so it needs preparing rather than ticking. We set out the wider interaction in our guide to the UK non-dom reforms for wealthy Americans.
Build the Evidence for Condition A Now
The defences turn on contemporaneous evidence of purpose. Consequently, board minutes, advice letters and correspondence from the time of the transfer are worth far more than a reconstruction written a decade later. Furthermore, the purposes of everyone involved count, so the file should cover advisers and co-investors too.
Align the American Classification
Where the company is already a controlled foreign corporation, the transfer of assets abroad charge usually produces a usable credit, and little needs to change. Where it is not, a check-the-box election or a mark-to-market election can pull the US charge into the same years as the UK one. Ultimately, matching the timing converts double taxation into a single 45% cost.
Consider Whether the Structure Still Earns Its Keep
Many offshore companies were built for a tax world that no longer exists. Consequently, unwinding the structure is often cheaper than maintaining Form 5471 filings, UK attribution and two sets of accounts. Nevertheless, the exit itself is taxable in both countries, so model it before acting.
Missed Years, Discovery and Disclosure
Unreported transfer of assets abroad positions surface constantly, usually during a mortgage application, a divorce or a fund's compliance review. Therefore, fixing the position voluntarily is almost always cheaper.
Twelve Years of Exposure
Offshore matters carry a 12-year assessment window under section 36A of the Taxes Management Act 1970, and no careless behaviour is required. Consequently, an innocent misunderstanding about the transfer of assets abroad code still leaves more than a decade open. Our guide to HMRC discovery assessments explains how those years reopen.
Reporting It Properly
You report the charge on the foreign pages of your Self Assessment return, supported by HMRC's helpsheet HS262. Additionally, you should keep the company's accounts, the original transfer documents and contemporaneous evidence of commercial purpose, because the defences depend on evidence you may need years later.
Correcting the Past
Where years are missing, the route is HMRC's Worldwide Disclosure Facility. Furthermore, the American side usually needs work at the same time, because an unreported foreign company generally means unfiled Forms 5471 and unreported subpart F income. We cover the UK process in our guide to the Worldwide Disclosure Facility for US persons, and our IRS Streamlined filing service handles the US catch-up.
How TaxYork Can Help
TaxYork reviews offshore structures from both sides at once, because a transfer of assets abroad question is never only a UK question. Specifically, we test whether the transfer of assets abroad charges apply, whether Condition A or Condition B is arguable on your evidence, and whether a FIG claim is still open. Additionally, we compute the UK charge and the US inclusion together, so the credit position is modelled rather than assumed.
Where the structure no longer earns its keep, we model unwinding it, including the US consequences of liquidation. Furthermore, we prepare the disclosures and both sets of returns, which our US tax returns service and treaty optimisation service deliver as one piece of work.
Conclusion
The offshore company that looked harmless before you moved to London is now a live transfer of assets abroad filing position. Since April 2025, the charge covers worldwide income, the EU defence has gone, and a close company no longer breaks the chain between you and the transfer. Consequently, the transfer of assets abroad code reaches structures that were genuinely outside it a few years ago.
The good news is that the American rules often rescue the cash position, provided the company is a controlled foreign corporation and the credit is claimed correctly. Therefore, the right move is to model both sides now, claim any relief that remains open, and correct earlier years before HMRC asks.
Contact Us
If you own or benefit from a non-UK company and live in Britain, book a consultation with our US-UK team. You can also email hello@taxyork.com or call 020 3488 8606 to discuss your structure, your filing history and the years that may need correcting.
Disclaimer
This article is provided for general information only and does not constitute tax, legal or financial advice. Tax rules in the United States and the United Kingdom change frequently, and their application depends on your individual circumstances. The case study is illustrative, uses simplified assumptions including a fixed exchange rate, and ignores interest, penalties and state taxes unless stated. You should obtain professional advice tailored to your situation before acting on any information in this article. TaxYork accepts no liability for any loss arising from reliance on this content.