TSEM4640 - Settlements legislation Rules affecting non-domiciled and deemed domiciled settlors of non-resident trusts from 6 April 2017 鈥� 5 April 2025: Meaning of untaxed benefits total

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

These are the steps to calculate whether an individual has an 鈥榰ntaxed benefits total鈥� for the purposes of ITTIOA S643A.听

  • Step 1 鈥� If the individual is the settlor, identify听each benefit provided to them by the trustees at a time when the settlor is not relevantly domiciled听and in a tax year that is the current year or an earlier year听

If the individual is not the settlor, identify听each benefit provided by the trustees to them at a time when the individual is a close member of the settlor's听family and in a tax year that is the current or earlier tax year.听

  • Step 2 鈥� identify听the amount or value of each benefit identified听in each strand of Step 1, and calculate the total of those amounts and values听

  • Step 3 鈥� take the total calculated at step 2 and deduct听

  • Any part of it on which the individual is liable听to income tax otherwise than under S643A听

  • Any income treated听by S643A, S643J or S643L听as arising to a person for a tax year earlier than the current year听

  • The whole or any part of a benefit identified听at Step 1 that is taken听into account听in charging Income Tax under Transfer of Assets Abroad legislation听

  • Any amount required to be deducted by S643D听(previous听capital gains tax charge)听

  • Step听4 鈥� If the result of the calculation at Step 3 is greater than nil听then that amount is the individuals untaxed benefits total for the settlement for that year.听

Relevantly domiciled means that the individual is domiciled in the UK, or they are deemed听domiciled in the UK under Condition A (returner).听

S742C to 742E ITA 2007 (value of certain benefits) apply for the purpose of calculating the value of a benefit.听 See INTM601600 for more details.听

Example 1听

Louise has been living in the UK for 17 years, but she is not domiciled in the UK.听 In 2013 she settled a non-resident trust for the benefit of herself and her husband Nigel.听 Nigel is not resident in the UK.听 The trustees of the settlement purchased听a property in Spain for Nigel to live in.听 From 2017/18 Louise is treated as being deemed听domiciled in the UK.听 As the settlor of the trust Louise will be assessable to tax on any benefits that she receives from the trust that she settled.听 She will also be assessable on any benefits that Nigel who is non-resident receives in 2018/19 in respect of the use of the Spanish property (this is because Nigel is a close family member and he is non-resident,听see TSEM4650.)听

If Nigel becomes resident in the UK in 2019/20 the benefit of the use of the property in Spain will be assessable on him (Nigel is UK domiciled).听 As Louise was assessable on the benefit in 2018/19 by virtue of ITTOIA 05/S643A (see TSEM4635) the amount deducted in Step 3听as set out above will include the value of the benefit assessable on Louise in 2018/19.听