Commissioners for His Majesty's Revenue and Customs v Fisher & Anor

Factual and Procedural Background

A family-owned betting business was originally carried on through Company A, a corporation incorporated and resident in The State. In 1999, a new entity, Company B, was incorporated in The Territory. Between August 1999 and February 2000 the entire tele-betting operation of Company A was sold to Company B at an independently-assessed valuation. The shareholders of both companies were four family members (hereafter “the Appellants”), none of whom individually owned a majority shareholding.

The Respondent (“HMRC”) issued assessments for the tax years 2000/01-2007/08, treating the profits of Company B as the deemed income of the Appellants under section 739 of the Income and Corporation Taxes Act 1988 (ICTA 1988). The assessments were substantial and were based on each Appellant’s percentage holding in Company B, irrespective of the monies actually received.

• First-tier Tribunal (“FTT”) (2014): held that each Appellant was to be treated as a transferor; however, some appeals succeeded on other grounds.
• Upper Tribunal (“UT”) (2020): reversed the FTT, holding the transfer had been made by Company A, not by any individual shareholder.
• Court of Appeal (“CA”) (2021): by majority reinstated HMRC’s assessments on two Appellants but not on the third.
• Supreme Court (“the Court”): current decision allowing the family’s appeal and dismissing HMRC’s cross-appeal.

Legal Issues Presented

1. Whether, for the purposes of section 739 ICTA 1988, the individual assessed must have been the transferor of the assets, or whether any individual with a “power to enjoy” the overseas income can be charged.
2. If only a transferor can be charged, can individual shareholders in a company be treated as “quasi-transferors” where the company (and not the individuals) effected the transfer?

Arguments of the Parties

Appellants’ Arguments (by Attorney Afzal)

• Section 739 can apply only to an individual who actually transferred the assets abroad; authority relied upon: Vestey.
• The shareholders’ vote in favour of the sale by Company A does not render them transferors or quasi-transferors.
• Section 740 exists precisely to deal with non-transferors, confirming that section 739 is limited to transferors.
• The presence of section 744 (no duplication of charge) does not expand section 739, which remains penal and therefore should be construed narrowly.

Respondent’s Arguments (by Attorney Ewart)

• Vestey does not bind the Court because the statutory context has changed; section 744 now provides an apportionment mechanism that resolves the constitutional concerns highlighted in Vestey.
• The phrase “such an individual” in section 739(2) imports only ordinary residence, not the requirement of having made the transfer.
• Shareholders who procure or are “associated with” a corporate transfer should be regarded as quasi-transferors; therefore the Appellants fall within section 739.
• The flexibility and deterrent purpose of the transfer of assets abroad code (TOAA) justify a broad construction that catches sophisticated avoidance structures.

Table of Precedents Cited

Court's Reasoning and Analysis

Judge Rose, delivering the opinion of a unanimous panel, held that:

• Natural meaning of section 739: The phrase “such an individual” in subsection (2) incorporates all descriptors in subsection (1), including that the person avoided tax by means of the transfer. Therefore the individual must be the transferor.
• Section 744 does not broaden the charge: Although section 744 prevents double taxation and allows HMRC to apportion income, it does not cure the constitutional and practical defects identified in Vestey when non-transferors are assessed on the whole overseas income.
• Role of section 740: Parliament expressly created a separate, less severe charge for non-transferors who receive benefits. This indicates that section 739 was never intended to apply to non-transferors.
• Spousal extension: Section 742(9) (the “spousal extension”) only makes sense if section 739 is confined to transferors; otherwise it would be superfluous.
• No “quasi-transferor” status for shareholders: Shareholders—even controlling shareholders—do not “procure” or “effect” a company’s transfer merely by voting in favour of it. The Court endorsed the analysis in Pratt that treating shareholders as transferors would be unworkable and uncertain.
• Application to the facts: The legal transferor was Company A. None of the Appellants personally transferred the assets, acted through an agent, or otherwise fell within section 739. Consequently, the TOAA charge cannot be imposed on them.

Holding and Implications

HELD: Appeals of the Appellants ALLOWED; cross-appeal of HMRC DISMISSED.

Immediate Effect: The assessments raised against the three Appellants under section 739 ICTA 1988 are set aside.

Broader Implications: The decision reaffirms that the transfer-of-assets-abroad code applies only to individuals who themselves (or through an agent) transfer assets overseas. Shareholders are not liable merely because a company they control effects the transfer. Parliament may consider legislative amendment if it wishes to tax such scenarios, but any change must address the constitutional and practical deficiencies highlighted by the Court.