TSEM4635 - Settlements legislation Rules affecting non-domiciled and deemed domiciled settlors of non-resident trusts from 6 April 2017 鈥� 5 April 2025: Deemed income because of benefits for the settlor or close family member
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 onwards.听
The Finance Act 2018 introduced a听benefits听charge into the settlement's听legislation.听 The charge applied听so that in some circumstances听an individual would听pay tax on a benefit that听they received听from the trust.听 A settlor听could听also be charged听tax on a benefit provided to a close member of their family.听 There were听also onward gift rules (TSEM4650 onwards).听 听
The paragraphs below look at ITTOIA 05/S643A听that was in force from 6 April 2018 鈥� 5 April 2025.听
This section only applied听when a settlor听was听not domiciled in the UK,听or听they were听deemed听domiciled in the UK under condition B.听
If an individual had听an untaxed benefits total for a settlement in a tax year,听then the amount of the untaxed benefit total that did听not exceed the settlements protected available income听would be听the听deemed income.听
Settlor receives the benefit听
If the听settlor was听UK resident for the tax year听and they receive a benefit,听then the deemed income is chargeable on them.听
Close family member听receives the benefit听
If a close family member received听the benefit and they were听UK resident for the tax year and are either not a remittance basis user, or they are a remittance basis user,听and the full amount of the benefit was听remitted to the UK听then the deemed income is chargeable on the close family member.听
If a close family听member received听the benefit听and they were听not resident in the UK in the tax year or听they听were听a remittance basis user and none of the deemed income was听remitted to the UK, then听the deemed income is treated as that of the settlor, if听the settlor was听UK resident听in the tax year.听
If the individual receiving the benefit was a remittance basis user and only part of the deemed income was听remitted to the UK听in the tax year, then that remitted part will be chargeable on them and the remaining part of the benefit is听taxable on the settlor.听
Example 1听
Simon has been living in the UK for 21 years.听 He is not domiciled in the UK.听 In 2014 Simon settled a non-resident discretionary trust of which he was a beneficiary with a substantial capital sum that he inherited from a distant relative.听 The trustees purchased听a property in London for Simon to live in and they invested the remainder听of the funds in overseas investments.听 Simon is a remittance basis user,听and the trustees have not remitted any of the income arising in the trust to the UK, so no income tax liability arises on Simon in respect of the trust income听under ITTOIA 05/S624.听听听
In 2017/18 Simon will be treated as deemed听domiciled in the UK because he has been resident in the UK for the last 21 years (see听INTM603200).听 As a consequence of听this Simon will from 2018/19听be assessable under ITTOIA 05/S643A听on the value of the benefits provided to him by the trustees (use of the London property) to the extent that there is sufficient relevant income within the trust to match against the value of the benefit provided.听