INTM601720 | Transfer of assets abroad: The benefits charge: Measure of benefits charge

The benefits charge is a charge on ‘income treated as arising’ to the individual and it is a charge by reference to the amount treated as arising.

Whether income is treated as arising, and if so the amount of it, is determined by the application of a formulaic approach which, in effect, compares benefits received by the individual with the income of a person abroad that can be used for providing a benefit (the relevant income of the tax year).

This is neither a charge on the actual income of the person abroad, nor on the benefits received: rather, it is an amount determined by comparison of both elements over time.

In ITA 2007 this formulaic approach is described as a series of Steps which determine both whether an amount of income is treated as arising, and if so the amount of that income for any tax year (ITA07/S733).

The formula consists of six Steps to arrive at the amount of income to be treated as arising to the individual. Such an amount can be for any tax year for which the computation provides that income is treated as arising. It will not necessarily be the year in which the benefit is actually received by the individual, and neither will it necessarily be in the year in which the relevant income arose.

Where the Steps approach is being applied for a tax year it will cover all years that fall to be taken into account in making that calculation, not just those from April 2007.

INTM601740 sets out details of the six Steps.

INTM601760 discusses a modification to the Steps formula.

INTM601780 contains an example based on the Steps formula.

INTM601800 contains an example including modifications.

INTM601820 looks back to the situation prior to April 2007 and seeks to show that, although the methodology that existed was not the series of ‘Steps’ introduced by ITA 2007, its effect was broadly the same.