TSEM4635 - Settlements legislation Rules affecting non-domiciled and deemed domiciled settlors of non-resident trusts from 6 April 2017 – 5 April 2025: Deemed income because of benefits for the settlor or close family member
Source: gov.uk (2025-04-07)


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. Detailed guidance on the changes from 6 April 2025 can be found at TSEM4700 (https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4700) onwards.

The Finance Act 2018 introduced a benefits charge into the settlement's legislation. The charge applied so that in some circumstances an individual would pay tax on a benefit that they received from the trust. A settlor could also be charged tax on a benefit provided to a close member of their family. There were also onward gift rules (TSEM (https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4650)4650 (https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4650)onwards).

The paragraphs below look at ITTOIA 05/S643A that was in force from 6 April 2018 – 5 April 2025.

This section only applied when a settlor was not domiciled in the UK, or they were deemed domiciled in the UK under condition B.

If an individual had an untaxed benefits total for a settlement in a tax year, then the amount of the untaxed benefit total that did not exceed the settlements protected available income would be the deemed income.

Settlor receives the benefit

If the settlor was UK resident for the tax year and they receive a benefit, then the deemed income is chargeable on them.

Close family member receives the benefit

If a close family member received the benefit and they were UK resident for the tax year and are either not a remittance basis user, or they are a remittance basis user, and the full amount of the benefit was remitted to the UK then the deemed income is chargeable on the close family member.

If a close family member received the benefit and they were not resident in the UK in the tax year or they were a remittance basis user and none of the deemed income was remitted to the UK, then the deemed income is treated as that of the settlor, if the settlor was UK resident in the tax year.

If the individual receiving the benefit was a remittance basis user and only part of the deemed income was remitted to the UK in the tax year, then that remitted part will be chargeable on them and the remaining part of the benefit is taxable on the settlor.

Example 1

Simon has been living in the UK for 21 years. He is not domiciled in the UK. 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. The trustees purchased a property in London for Simon to live in and they invested the remainder of the funds in overseas investments. Simon is a remittance basis user, 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 under ITTOIA 05/S624.

In 2017/18 Simon will be treated as deemed domiciled in the UK because he has been resident in the UK for the last 21 years (see INTM603200 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm603200)). As a consequence of this Simon will from 2018/19 be assessable under ITTOIA 05/S643A 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.