INTM603635 - Transfer of assets abroad: 6 April 2025 non-UK domicile reforms: Changes to ITA07/S720 income charge
Source: gov.uk (2025-04-07)


Before 6 April 2025, a UK resident individual who was non-UK domiciled could use the remittance basis of taxation. So, if they had made a relevant transfer which resulted in income becoming payable to a person abroad to which ITA07/S720 applied, they would only be assessable on an amount equivalent to the UK source income of the person abroad and any foreign source income that was remitted to the UK during the particular tax year. INTM60 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm601960)1960 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm601960) onwards provides guidance on the application of the remittance basis to the income charge.

From 6 April 2025 the remittance basis of taxation has been removed and so a UK resident individual who is taxable under ITA07/S720 will be assessable on all the income arising to the person abroad, both UK source and foreign source, in the tax year that the income arises.

Example 1

Mr A, a non-UK domiciled individual became UK resident in the tax year 2015 - 2016. Shortly after arriving in the UK, he subscribed for shares in Guernsey resident company A Ltd. A Ltd used the subscription proceeds to invest in overseas investments which generated income of £100,000 per year. Mr A meets the conditions for a charge under ITA07/S720 to apply, however he was a remittance basis user and - as A Ltd retained all the income overseas - no liability would arise on Mr A for the years 2015 - 2016 to 2024 - 2025. However, from 2025 - 2026 as Mr A is taxable on the arising basis he will be assessable under ITA07/S720 on the £100,000 arising to A Ltd. Under ITA07/S725A Mr A will have the right to recover the tax paid from A Ltd. See INTM (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm600990)600990 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm600990) for more information on the right to recovery. The foreign income that arose to A Ltd during the years 2015 - 2016 to 2024 - 2025 may still be subject to an income tax charge on Mr A if this income is subsequently remitted to the UK (see INTM603645 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm603645)).

From 6 April 2025 the rules relating to the trust protections have been removed, meaning that the settlor of a non-resident trust - if they are UK resident and have power to enjoy the income of the trust and/or its underlying entities - will be taxable on an amount equal to this income as it arises. Guidance on how the trust protections applied for the years 2017- 2018 to 2024 - 2025 are at I (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm603180)NTM603 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm603180)180 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm603180) onwards

Amendments to ITA07/S721 from 6 April 2025 remove previous rules effective from 6 April 2017. Those previous rules calculated theincome of the person abroad on which an individual was taxable by reference to the individual’s domicile status. Where the individual was non-UK domiciled or deemed domicile under Condition B of ITA07/S835BA, those previous rules removed any protected foreign-source income from charge. The new amendments mean that from 6 April 2025 the amount treated as arising to an individual under ITA07/S720 is the amount of income arising to the person abroad. This will apply unless the individual comes within the 4-year FIG regime and makes a claim for the relevant tax year (see RFIG42100 (https://www.gov.uk/hmrc-internal-manuals/residence-and-fig-regime-manual/rfig42100)). For guidance on how to calculate the income of the person abroad see INTM (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm601100)601100 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm601100) onwards.

Example 2

Mr B a non-UK domiciled individual became UK resident in 2017 - 2018. Shortly after arriving in the UK,he settled £1 million into a Jersey resident trust. The trustees used the funds to subscribe for shares in a Jersey company B Ltd. B Ltd invested half the funds in overseas investments which generated income of £50,000 per year and half in UK investments which generated income of £40,000 per year. As the trust meets the criteria to be a protected trust, from 2017 - 2018 to 2024 - 2025 Mr B will be assessable on £40,000 per year under ITA07/S720 as this is the income of B Ltd that was UK source income. The £50,000 of overseas income is PFSI and therefore does not come within the scope of ITA07/S720. For the year 2025 - 26 Mr B will be assessable on £90,000 under ITA07/S720 because the overseas income arising in this year is no longer treated as PFSI. Under ITA07/S725A Mr B will have the right to recover the tax paid from B Ltd. See INTM600990 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm600990) for more information on the right to recovery. The PFSI that arose to B Ltd during the years 2017 - 2018 to 2024 - 2025 will be assessable if Mr B receives benefits which are matched with the PFSI.