Income Tax Act 2007 (c. 3)

Part 13 U.K. Tax avoidance

Chapter 2 U.K. Transfer of assets abroad

Modifications etc. (not altering text)

C1 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)

C2 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

Charge where power to enjoy income U.K.

[F1 721A Meaning of “protected foreign-source income” in section 721 U.K.

(1) This section has effect for the purposes of rule 2 of section 721(3B) (cases where the individual is not UK domiciled and is not deemed domiciled by virtue of Condition A in section 835BA).

(2) The income of the person abroad is “protected foreign-source income” so far as it is within subsection (3) or (4).

(3) Income is within this subsection if—

(a) it would be relevant foreign income if it were the individual's,

(b) the person abroad is the trustees of a settlement,

(c) the trustees are non-UK resident for the tax year,

(d) when the settlement is created, the individual is—

(i) not domiciled in the United Kingdom, and

(ii) if the settlement is created on or after 6 April 2017, not deemed domiciled in the United Kingdom, and

(e) no property or income is provided directly or indirectly for the purposes of the settlement by the individual, or by the trustees of any other settlement of which the individual is a beneficiary or settlor, at a time in the period—

(i) beginning with the start of 6 April 2017 or, if later, the creation of the settlement, and

(ii) ending with the end of the tax year,

when the individual is domiciled or deemed domiciled in the United Kingdom.

(4) Income is within this subsection if—

(a) it would be relevant foreign income if it were the individual's,

(b) the person abroad is a company,

(c) the trustees of a settlement—

(i) are participators in the person abroad, or

(ii) are participators in the first in a chain of two or more companies where the last company in the chain is the person abroad and where each company in the chain (except the last) is a participator in the next company in the chain,

(d) the individual's power to enjoy the income results from the trustees being participators as mentioned in paragraph (c)(i) or (ii),

(e) the trustees are not UK resident for the tax year,

(f) when the settlement is created, the individual is—

(i) not domiciled in the United Kingdom, and

(ii) if the settlement is created on or after 6 April 2017, not deemed domiciled in the United Kingdom, and

(g) no property or income is provided directly or indirectly for the purposes of the settlement by the individual, or by the trustees of any other settlement of which the individual is a beneficiary or settlor, at a time in the period—

(i) beginning with the start of 6 April 2017 or, if later, the creation of the settlement, and

(ii) ending with the end of the tax year,

when the individual is domiciled or deemed domiciled in the United Kingdom.

(5) For the purposes of subsections (3)(e) and (4)(g), the addition of value to property comprised in the settlement is to be treated as the direct provision of property for the purposes of the settlement.

(6) Section 721B (tainting) contains further provision for the purposes of subsections (3)(e) and (4)(g).

(7) In this section—

• “participator”, in relation to a company, has the meaning given by section 454 of CTA 2010;

• “deemed domiciled” means regarded for the purposes of section 718(1)(b) as domiciled in the United Kingdom as a result of section 835BA of ITA 2007 having effect.]

Textual Amendments

F1 Ss. 721A, 721B inserted (with effect in accordance with Sch. 8 para. 39 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 8 para. 29