TSEM4605 - Settlements legislation: Rules affecting non-domiciled and deemed domiciled settlors of non-resident trusts from 6 April 2017-5 April 2025: Background
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.鈥� Detailed guidance on the changes from 6 April 2025 can be found at TSEM4700听onwards.听
Background听
In听his 2015 budget statement the Chancellor announced听changes to the taxation of non-domiciled individuals.听 One of these was the expansion of the concept of being 鈥榙eemed domiciled鈥櫶齣n the UK for income tax purposes.听 A deemed domiciled individual would听not be able to claim the remittance basis of taxation.听 Individuals affected were听split into two groups,听the听first being听long-term resident non-domiciles听(condition B)听and the second known as 鈥榬eturners鈥櫶�(condition A) who were听individuals who were non-domiciled, bur resident in the UK in the relevant year and were born in and听have a domicile of origin in the UK.听听听For further details of when an individual will be considered deemed听domiciled see INTM603200听
The government announced听that non-domiciliaries听who set up non-resident trust structures before becoming deemed domiciled in the UK under the long-term听resident rules would not be taxed on the foreign source income of such trusts and their underlying companies provided that such income was retained听within the structure听and no further property was settled.听
From the 6 April 2017 deemed-domiciled long-term resident settlors would be liable to pay income tax on the UK source income arising within a trust structure in which they had retained听an interest.听
From 2018/19 a benefits charge was introduced to tax any benefit received from the trust to the extent that such benefits could be matched with this protected foreign source income within the trust.听听
Similar amendments have also been made in respect of the Transfer of Assets Abroad (ToAA) legislation and for capital gains arising in these structures.听Neither of these听areas are covered by this manual.听
The guidance in this manual will assume that the settlements legislation is in point, and no consideration will be given听to ToAA or CGT legislation.听 Please see the relevant guidance for these areas.