Introduction Background Note
33.The situations to which section 765 has been applied over the decades have changed in reaction to significant developments in UK tax law such as the introduction of capital gains tax and the controlled foreign company rules as well as to commercial developments.
34.To ease administration section 765 and its predecessors have provided that the Treasury may issue ‘general consents’. If a transaction is within a general consent the company does not have to make a special application or post-transaction notification, it may go ahead and do what it proposes.
35.Section 765A removes from section 765 all movements of capital to which the European Community Directive on Capital Movements applies. But although companies no longer need Treasury consent they are required to report to HMRC any transaction they have carried out to which, but for section 765A, they would have needed special consent.
36.The requirement to apply for consent is regarded by business as an administratively burdensome obstacle to entering into commercial transactions. This legislation therefore removes the consent requirement and modernises the rules, replacing them with a post-transaction reporting requirement targeted at transactions where there is a high risk of potential avoidance activity.