INTM603675 - Transfer of assets abroad: 6 April 2025 non-UK domicile reforms: Changes to ITA07/S731 benefits 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 received a benefit as a result of a relevant transaction, they would only be assessable on the amount of the benefit matched with relevant income that was UK source and any of the benefit matched with relevant income from a foreign source that was remitted to the UK. INTM602100 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm602100) onwards provides guidance on the application of the remittance basis to benefits arising under ITA07/S731.

Until 6 April 2017 the benefits charge only applied to individuals who received benefits who had not made the relevant transfer. However, from this date under the trust protection measures a settlor/transferor of a protected non-resident trust is not taxed on the protected foreign-source income (PFSI) of the structure as it arises, but they are taxed on any benefits that they received under ITA07/S731 to the extent that the benefit received was matched with the PFSI or TPI of the trust (see INTM603420 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm603420)).

With the changes to the benefits charge that were introduced from 6 April 2017 there were also additional charges introduced whereby the settlor of a protected non-resident trust could be assessable on benefits received by a close family member of the settlor if that close family member were either non-UK resident or a non-UK domiciled remittance basis user. Details of this charge can be found at INTM (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm603500)603500 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm603500). These close family member rules were contained at ITA07/S733A. With effect from 6 April 2025 this legislation has been repealed and replaced by ITA07/S735AE. Guidance on this new provision can be found at INTM603715 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm603715).

From 6 April 2018 a further benefits charge was introduced: the onward gift charge. This charge applied if the original recipient of the benefit was either non-UK resident or non-UK domiciled and a remittance basis user and made an onward gift of the benefit. Guidance on these onward gift provisions can be found at INTM603520 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm603520) onwards. As with the close family member rules the original legislation covering onward gifts at ITA07/S733B to733E has been repealed and replaced by ITA07/S735AF - S735AG with effect from 6 April 2025. Guidance on these new provisions can be found at INTM603725 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm603725).

From 6 April 2025 the benefits charge at ITA07/S731 has been amended. From this date the benefits charge will once again only apply to non-transferors. Amendments have been made to ITA 07/S732(1)(d) to reflect this. Benefits received by a transferor from what were protected settlements or their underlying entities from 6 April 2025 may still be taxable under new legislation introduced at ITA07/S735AA to S735AG to the extent that the benefits are matched with protected foreign-source income or transitionally protected income. Details of the application of these provisions can be found at INTM603705 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm603705) onwards .