INTM601920 | Transfer of assets broad: Non-domiciled individuals taxation up to 5 April 2025: Background

Before Finance Act 1981, domicile status made no difference to tax charges under the transfer of assets legislation. In effect this meant that individuals, regardless of their domicile status, were chargeable on the whole of the income of the person abroad where they met the criteria for the legislation to apply.

This contrasted with the situation for individuals who received income directly. In particular such individuals who were UK resident but regarded as non-UK domiciled could benefit from the remittance basis of taxation in respect of foreign-source income.

The transfer of assets legislation was therefore changed to bring it more into line with the direct charging provisions relating to the income of individuals ordinarily resident, but not domiciled in, the UK.

Those provisions relating to non-UK domiciled individuals within the transfer of assets legislation then remained largely unchanged over the years until the Tax Law Rewrite, which became Income Tax Trading and Other Income Act 2005 (ITTOIA). The provisions for transfer of assets were then further changed with Finance Act 2008, introducing a full remittance basis for transfer of assets in line with major changes to remittance basis for direct personal income introduced in that Finance Act.

The current provisions that affect transfer of assets charges are now within ITA 2007, and there are four sections as follows:

Provisions affecting the income charge

ITA07/S726 (where power to enjoy)

ITA07/S730 (receipt of a capital sum)

Provisions affecting the benefits charge

ITA07/S735 and S735A (receipt of benefits)

These sections were amended or introduced by Finance Act 2008 and the revised terms apply for the tax years 2008-09 onwards.

With effect from 6 April 2017 and the introduction of the UK deemed domicile rules, changes have been made to the tax treatment of certain non-resident trusts that have been settled by non-UK domiciled and UK deemed domiciled individuals. These changes mean that ITA07/S720 and S727 will not apply to the protected foreign-source income of such trusts and their underlying companies. Detailed guidance on these changes can be found at INTM603180 onwards.

From 6 April 2025 the rules around the taxation of non-UK domiciled individuals ended and individuals are taxable based on their residence position only. This section on non-domiciled individuals only applies to the treatment of non-UK domiciled individuals for the years up to and including 2024 - 2025. Detailed guidance on the changes from 6 April 2025 onwards can be found at INTM603615 onwards.