Part 13

Tax avoidance
Chapter 2

Transfer of assets abroad

Transitional provision about protected foreign-source income and transitionally protected income

Onward gifts from non-residents or qualifying new residents
735AF
1
Subsection (2) applies if—
a
a benefit (“the original benefit”) is provided to an individual (“the original recipient”) out of assets which are available for the purpose as a result of—
i
the relevant transfer, or
ii
one or more associated operations,
b
the original recipient is non-UK resident, or is a qualifying new resident, for the tax year in which they receive the original benefit,
c
section 735AE (1) (close family member’s benefits attributed to settlor) does not apply to the provision of the original benefit to the original recipient,
d
at the time when 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, if the whole or part of the original benefit is passed on to another person in accordance with the arrangements or intention, that other person will be UK resident when they receive at least part of what is passed on to them,
e
the original recipient provides a benefit (“the onward gift”) to another person (“the subsequent recipient”)—
i
at the time when the original benefit is received by 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 received by the original recipient and, it is reasonable to assume, in anticipation of the original benefit’s being provided, and
f
the onward 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 property’s being provided to the subsequent recipient.
2
For the purposes of sections 732, 735AD(1) and 735AE(1), so much of the onward gift as falls within subsection (1)(f) is (so far as would not otherwise be the case) treated as a benefit provided to the subsequent recipient out of assets which are available for the purpose as a result of an associated operation in relation to the relevant transfer.
3
For the purposes of subsection (1)(e), the circumstances in which the original recipient provides a benefit to the subsequent recipient include circumstances where there is a series of two or more benefits starting with a benefit provided by the original recipient and ending with a benefit provided to the subsequent recipient; and in such a case—
a
the onward gift is treated for the purposes of subsection (1)(e) as provided when the final benefit in the series is provided, and
b
the reference to the onward gift in subsection (1)(f) is to be read as a reference to each benefit in the series.
4
Where the conditions in subsection (1)(e) and (f) are met, it is to be presumed, unless the contrary is shown, that the condition in subsection (1)(d) is also met.
5
In subsection (1)(d), “
arrangements
” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
Pt. 13 Ch. 2 modified (for the tax year 2025-26 and subsequent tax years) by Finance Act 2025 (c. 8), Sch. 10 paras. 10(9), 11
Pt. 13 Ch. 2 applied (with effect in accordance with art. 1(2)(3) Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 21
Pt. 13 Ch. 2 applied by 1988 c. 1, s. 762ZA (as inserted (21.7.2008 with effect in accordance with Sch. 7 para. 98 of the amending Act) by Finance Act 2008 (c. 9), Sch. 7 para. 94)
Ss. 735AA-735AG and cross-heading inserted (for the tax year 2025-26 and subsequent tax years) by Finance Act 2025 (c. 8), Sch. 12 paras. 44, 70(1) (with Sch. 12 para. 73)