TSEM4710 - Settlements Legislation: Rules affecting non-domiciled and deemed domiciled settlors of non-resident trusts from 6 April 2025: Removal of Protected Foreign-Source Income (PFSI)鈥� 鈥�

For details of the rules introduced from 6 April 2017 on Protected Foreign-Source Income (PFSI),听蝉别别 TSEM 4610.鈥赌�听

From 6 April 2025 the trust protections no longer apply to the settlements听legislation听and therefore sections 628A through to section 628C and section听630A ITTOIA 2005 have been repealed.听听

References to PFSI have been removed from various听sections,听the main ones听being sections听624 and 629 ITTOIA 2005.The removal of PFSI听means that income arising under the settlement听from 6 April 2025听will be treated as income of the UK resident settlor if either of the following charging provisions听apply:听听听

  • S624 ITTOIA 2005 鈥�听income where settlor retains听an interest;听

  • S629 ITTOIA 2005 - income paid听to 鈥榬elevant鈥� children听of settlor听

Reference to 鈥榰nprotected鈥� income has been removed from sections 635 through to 637 ITTOIA 2005.听 The removal of the concept of PFSI means that听鈥榩rotected鈥� income will no longer arise.鈥�听

New section 643ZB ITTOIA 2005 will ensure PFSI that has arisen between 6 April 2017 and 5 April 2025 and Transitional Trust Income (TTI) that has arisen between 6 April 2008 and 5 April 2017 cannot be taxed under sections 624听or听629.听 However,听if a benefit听or onward gift听is provided to the听settlor or a close family member, there could be a charge under section 643A听ITTOIA 2005听to the extent that it can be matched to PFSI/TTI听arising before 6 April 2025.听

TTI and PFSI-what are they and when do they accrue?

Transitional Trust Income (TTI) S643ZA ITTOIA 2005 6 April 2008 to 5 April 2017
Protected Foreign-Source Income (PFSI) S643ZA ITTOIA 2005 6 April 2017 to 5 April 2025