TSEM4755 - Settlements Legislation: Rules affecting non-domiciled and deemed domiciled settlors of non-resident trusts from 6 April 2025 : Onward gifts
From 6 April 2025 sections 643I through to 643N ITTOIA 2005 have been replaced by new section 643EA. The conditions for the application of the onward gift rules have not changed in essence, but they have been simplified.
The onward gift rules apply if a benefit is provided to an individual (the original recipient) at a time that:
they are not taxable in relation to the amount or value of the benefit, or they are a qualifying new resident; and
there are arrangements or an intention for them to pass the whole or part of that benefit, directly or indirectly, to another person who is UK resident.
There are various conditions, all of which must be met:
The onward gift is provided either before or within 3 years of the original benefit being provided,
The onward gift includes the whole or part of the original benefit, or anything that represents or derives from the original benefit, or is any other property where the original benefit was provided with a view to facilitate or in connection with the onward gift,
The subsequent recipient is the settlor or a close member of the settlor's family.
The legislation does not apply where the close family member’s benefits are included in the settlor’s untaxed benefits total under section 643B(2) ITTOIA 2005.
Where this legislation applies, the amount of the onward gift is included in the subsequent recipient’s untaxed benefits total – see section 643B(1) and section 643B(2)(a) ITTOIA 2005.
If there is a series of gifts, starting with the original recipient and ending with the settlor or a close family member (CFM), then the onward gift is treated as being provided when it arrives with the settlor or the CFM. However, each benefit in the series should include the whole or part of the original benefit, or anything that represents or derives from the original benefit or is any other property where the original benefit was provided with a view to facilitate or in connection with the onward gift.
If the onward gift is made in advance of the original benefit being provided, then it is treated as being made immediately after and in the same tax year as the original benefit is provided to the original beneficiary.