TSEM4675 | Settlements legislation: Rules affecting non-domiciled and deemed domiciled settlors of non-resident trusts from 6 April 2018 – 5 April 2025: Onward gift to settlor or close family member by other recipient

The guidance on this page relates to the period 6 April 2017 - 5 April 2025. 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. Detailed guidance on the changes from 6 April 2025 can be found at TSEM4700 onwards.

There are circumstances where a charge will apply to the settlor or a close member of the settlor’s family under ITTOIA05/S643M. This will apply where a gift is made, and:

• the “the original recipient” is not taxed on the original benefit,

• they are not the settlor or a close family member of the settlor,

But:

• the final recipient is the settlor or a close family member of the settlor's family.

There are various conditions that must be met for this charge to apply:

• At the time the original benefit is provided there must be arrangements, or an intention to directly or indirectly pass the whole or part of the benefit on to another person (“the subsequent recipient”), and it is reasonable to expect that the subsequent recipient will be UK resident when they receive at least part of what is passed to them. This will be assumed to be met where the other conditions are met.

• The original recipient directly or indirectly makes the gifts to the recipient (whether the subsequent recipient, or a recipient within a series of gifts) within 3 years of the day containing the time when the original benefit was provided to them or at any before the original benefit was provided, where it is reasonable to assume it was provided in anticipation of original benefit being provided.

• The gift is or includes the whole or part of the original benefit, or anything that derives from or represents that benefit, or any other property where the original benefit is provided with a view to enabling or facilitating the making of the gift.

If part of the benefit is taxable on the original recipient, then only the remainder will be taxable on the settlor or the close family member.