Income Tax (Trading and Other Income) Act 2005

[F1 643M Onward gift to settlor or close family member by other recipient U.K.

(1) Subsection (3) applies if—

(a) the trustees of a settlement provide a benefit (“the original benefit”) to an individual (“the original recipient”),

(b) the original recipient is not the settlor,

(c) at the time the original benefit is provided, the original recipient is not a close member of the settlor's family (see section 643H),

(d) the original recipient is not taxed on the original benefit (see subsection (7)),

(e) at the time the original benefit is provided—

(i) there are arrangements, or there is an intention, as regards the (direct or indirect) passing-on of the whole, or part, of the original benefit to another person, and

(ii) it is reasonable to expect that, in the event of the whole or part of the original benefit being passed on to another person as envisaged by the arrangements or intention, that other person will be UK resident when they receive at least part of what is passed on to them,

(f) the original recipient makes, directly or indirectly, a gift (“the onward payment”) to a person (“the subsequent recipient”)—

(i) at the time the original benefit is provided to the original recipient, or at any later time in the 3 years beginning with the day containing that time, or

(ii) at any time before the original benefit is provided to the original recipient and, it is reasonable to assume, in anticipation of the original benefit being provided,

(g) the gift is of or includes—

(i) the whole or part of the original benefit,

(ii) anything that (wholly or in part, and directly or indirectly) derives from, or represents, the whole or part of the original benefit, or

(iii) any other property, but only if the original benefit is provided with a view to enabling or facilitating, or otherwise in connection with, the making of the gift of the property to the subsequent recipient, and

(h) the subsequent recipient—

(i) is the settlor, or

(ii) is a close member of the settlor's family at the time the onward payment is made or, where that time is given by subsection (4), at either or both of the time so given and the actual time the onward payment is made.

(2) Where—

(a) there is a series of two or more gifts,

(b) the first gift in the series is made, directly or indirectly, by the original recipient—

(i) at the time the original benefit is provided, or at any later time in the 3 years beginning with the day containing that time, or

(ii) at any time before the original benefit is provided and, it is reasonable to assume, in anticipation of the original benefit being provided,

(c) the recipient of a gift in the series is the person who makes, directly or indirectly, the next gift in the series,

(d) the recipient of the last gift in the series is the settlor or, at the time that last gift is made, is a close member of the settlor's family,

(e) as regards any earlier gift in the series, its recipient—

(i) is not the settlor, and

(ii) is not, at the time that earlier gift is made, a close member of the settlor's family, and

(f) the condition in subsection (1)(g) is met in relation to each gift in the series,

the last gift in the series is to be treated for the purposes of subsection (1)(f) as if its maker were the original recipient (and not its actual maker).

(3) So much of the onward payment as is within any of sub-paragraphs (i) to (iii) of subsection (1)(g) is treated for the purposes of Step 1 in section 643B(1) as a benefit provided by the trustees to the subsequent recipient at the time the onward payment is made.

(4) Where the onward payment is made as mentioned in subsection (1)(f)(ii), the onward payment is to be treated, for the purposes of subsections (1)(h) and (3), as made immediately after, and in the tax year in which, the original benefit is provided to the original recipient.

(5) Where subsection (1)(f) to (h) are met in any case, it is to be presumed (unless the contrary is shown) that subsection (1)(e) is also met in that case.

(6) Where the benefit mentioned in section 643I(1)(b) is one that subsection (3) of this section treats as provided, section 643I(1) has effect with the omission of its paragraph (c).

(7) For the purposes of subsection (1)(d), the original recipient is taxed on the original benefit if the original recipient is liable to income tax, or capital gains tax, by reference to the amount or value of the original benefit; and where the original recipient is so liable by reference to the amount or value of part only of the original benefit, this section applies as if the two parts of the original benefit were separate benefits.

(8) In this section—

• “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable),

• “gift” includes any benefit, and

• “make”, in relation to a gift that is a benefit, means confer,

and see also section 643B(4) to (7) (interpretation of references to provision of benefits by trustees).]

Textual Amendments

F1 Ss. 643A-643N and cross-heading inserted (with effect in accordance with Sch. 10 para. 21 of the amending Act) by Finance Act 2018 (c. 3), Sch. 10 para. 11 (with Sch. 10 para. 22)