The charge under this section applies for the purpose of preventing the avoiding of liability to income tax by individuals who are F7... UK resident by means of relevant transfers.

Income tax is charged on income treated as arising to such an individual under section 721 (individuals with power to enjoy income as a result of relevant transactions).

Tax is charged under this section on the amount of income treated as arising in the tax year.

But see section 724 (special rules where benefit provided out of income of person abroad) F2and section 726 (non-UK domiciled individuals to whom remittance basis applies).

The person liable for any tax charged under this section is the individual to whom the income is treated as arising.

For rules about the reduction in the amount charged in some circumstances and the availability of deductions and reliefs, see—

• section 725 (reduction in amount charged where controlled foreign company involved), and

• section 746 (deductions and reliefs where individual charged under this section or section 727).

For exemptions from the charge under this section, see sections 736 to F8742A (exemptions where no tax avoidance purpose or genuine commercial transaction F9etc).

Income is treated as arising to such an individual as is mentioned in section 720(1) in a tax year for income tax purposes if F12conditions A to C are met.

Condition B is that the income F13of the person abroad would be chargeable to income tax if it were the individual's and received by the individual in the United Kingdom.

Condition C is that the individual is UK resident for the tax year.

The amount of the income treated as arising under subsection (1) is (subject to sections 724 and 725) given by the following rules—

• Rule 1 The amount is equal to the amount of the income of the person abroad if the individual—

  1. a

     is domiciled in the United Kingdom at any time in the tax year, or

  2. b

     is at any time in the tax year regarded for the purposes of section 718(1)(b) as domiciled in the United Kingdom as a result of section 835BA having effect because of Condition A in that section being met.

• Rule 2 In any other case, the amount is equal to so much of the income of the person abroad as is not protected foreign-source income (see section 721A).

In a case in which rule 2 of subsection (3B) applies, so much of the income of the person abroad as is protected foreign-source income for the purposes of that rule counts as “protected income” for the purposes of section 733A(1)(b)(i).

For the purposes of subsection (2), it does not matter whether the income F14of the person abroad may be enjoyed immediately or only later.

For the circumstances in which an individual is treated as having the power to enjoy income for the purposes of this section, see section 722.

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).

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

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.

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

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.

This section applies for the purposes of subsections (3)(e) and (4)(g) of section 721A.

Where this subsection applies, the outstanding amount is to be regarded as property directly provided on the deemed domicile date by the lender for the purposes of the settlement (despite subsection (2)).

For the purposes of this section—

• a settlement is “connected” with a person if the person is the settlor or a beneficiary of it;

• “deemed domiciled” has the same meaning as in section 721A;

• “official rate”, in relation to interest, means the rate of interest applicable from time to time under section 178 of FA 1989 for the purposes of Chapter 7 of Part 3 of ITEPA 2003.

For the purposes of section 721, an individual is treated as having power to enjoy income of a person abroad if any of the enjoyment conditions are met.

In subsection (1) “the enjoyment conditions” means conditions A to E as specified in section 723.

In determining whether an individual has power to enjoy income for the purposes of section 721, regard must be had to the substantial result and effect of all the relevant transactions.

Condition A is that the income is in fact so dealt with by any person as to be calculated at some time to enure for the benefit of the individual, whether in the form of income or not.

Condition C is that the individual receives or is entitled to receive at any time any benefit provided or to be provided out of the income or related money.

Condition D is that the individual may become entitled to the beneficial enjoyment of the income if one or more powers are exercised or successively exercised.

Condition E is that the individual is able in any manner to control directly or indirectly the application of the income.

This section applies if an individual has power to enjoy income of a person abroad for the purposes of section 721 because of receiving any such benefit as is referred to in section 723(3) (benefit provided out of income of person abroad).

Despite anything in section 720, the individual is liable to income tax under that section for the tax year in which the benefit is received on F17an amount equal to the whole of the amount or value of that benefit.

But subsection (2) does not apply so far as it is shown that the benefit derives directly or indirectly from income F18by reference to which the individual has already been charged to income tax for that tax year or a previous tax year F19under this Chapter.

The amount of income so treated is reduced by—

S×CACP

In a case in which section 724 applies, the reference to S in the formula in subsection (2) is to be read as a reference to X% of S.

“X%” is determined as follows—

Terms used in this section which are defined in Part 9A of TIOPA 2010 have the same meaning as in that Part.

This section applies in relation to income treated under section 721 as arising to an individual in a tax year (“the deemed income”) if section 809B, 809D or 809E (remittance basis) applies to the individual for that year.

For the purposes of this section the deemed income is “foreign” if (and to F24the corresponding extent that) the income mentioned in section 721(2) would be relevant foreign income if it were the individual's.

Treat the foreign deemed income as relevant foreign income of the individual.

For the purposes of Chapter A1 of Part 14 (remittance basis) treat so much of the income within section 721(2) as would be relevant foreign income if it were the individual's as deriving from the foreign deemed income.

In the application of section 832 of ITTOIA 2005 to the foreign deemed income, subsection (2) of that section has effect with the omission of paragraph (b).

In subsection (6)—

• “remitted to the United Kingdom” is to be read in accordance with Chapter A1 of Part 14, and

• “transitionally protected income” means any foreign deemed income where the income mentioned in section 721(2)—

  1. a

     arises in a tax year earlier than the tax year 2017-18,

  2. b

     would be protected foreign-source income as defined by section 721A if section 721A—

     1. i

        had effect for tax years earlier than the tax year 2017-18, and

     2. ii

        so had effect with the omission of its subsections (3)(e), (4)(g), (5) and (6), and

  3. c

     has not prior to 6 April 2017 been distributed by the trustees of the settlement concerned.