INTM601440 - Transfer of assets abroad: The benefits charge: Background

In 1981 a separate charge, which for the purpose of this guidance we have called ‘’the benefits charge’’, was introduced to the transfer of assets provisions for individuals who receive benefits as a result of a transfer of assets made by another person (INTM600760).

This followed the House of Lords decision in Ronald Arthur Vestey and Others v CIR (54 TC 503) when it was held that the contemporary income charge could only apply where the individual potentially chargeable had themselves made or procured the transfer of assets. The income charge is described in INTM600520 onwards.

From 10 March 1981, where income that arises to a person abroad as a result of a relevant transfer can be used, directly or indirectly, to provide a benefit for an individual who is ordinarily resident (or, from 6 April 2013, resident) in the UK, that individual is potentially chargeable to income tax under the benefits charge if the individual is not already chargeable to income tax on the income under the income charge.

Although the benefits charge only applies from 10 March 1981, the charge applies irrespective of when the transfer or associated operations took place.

It should be noted that the benefits charge has been expanded following the introduction of the rules around deemed domicile, so that from 6 April 2017 it can apply to non-domiciled and deemed domiciled settlors of non-resident trusts. There is a separate section on the new deemed domicile rules starting at INTM603180.