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 benefit received U.K.

[F1 733BRecipients of onward gifts U.K.

(1) Sections 733C to 733E apply if—

(a) an amount of income is treated as arising under section 732 to an individual (“the original beneficiary”) in a tax year (“the arising year”) but neither by section 733C nor by section 733E,

(b) under section 735A (if it applied also for this purpose) that amount would be matched—

(i) with an amount of relevant income that is protected income for the purposes of section 733A(1)(b)(i) (see sections 721(3BA) and 728(1B)), and

(ii) with the whole or part of a benefit received by the original beneficiary,

(c) at the time that benefit is received by the original beneficiary (“the distribution time”)—

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

(ii) it is reasonable to expect that, in the event of the whole or part of that 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,

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

(i) at the distribution time, or at any later time in the 3 years beginning with the start time, or

(ii) at any time before the distribution time and, it is reasonable to assume, in anticipation of receipt of the benefit mentioned in paragraph (b)(ii),

(e) the gift is of or includes—

(i) the whole or part of the benefit mentioned in paragraph (b)(ii),

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

(iii) any other property, but only if the benefit mentioned in paragraph (b)(ii) 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,

(f) except where an individual is liable as a result of section 733A(2) or (3) for the tax charged under section 731 on the amount mentioned in paragraph (a), either—

(i) the original beneficiary is non-UK resident for the arising year, or

(ii) section 809B or 809D or 809E (remittance basis) applies to the original beneficiary for the arising year and none of the amount mentioned in paragraph (a) is relevantly remitted before the end of the charging year, and

(g) where an individual is liable as a result of section 733A(2) or (3) for the tax charged under section 731 on the amount mentioned in paragraph (a), section 809B or 809D or 809E applies to that individual for the arising year and none of the amount mentioned in paragraph (a) is relevantly remitted before the end of the charging year.

(2) If—

(a) the amount mentioned in subsection (1)(a) is not treated as arising by section 733D (and neither by section 733C nor by section 733E),

(b) except where an individual is liable as a result of section 733A(2) or (3) for the tax charged under section 731 on that amount, section 809B or 809D or 809E applies to the original beneficiary for the arising year,

(c) where an individual is liable as a result of section 733A(2) or (3) for the tax charged under section 731 on that amount, section 809B or 809D or 809E applies to that individual for the arising year, and

(d) part only of that amount is relevantly remitted before the end of the charging year,

subsection (1)(a) is to be treated as referring instead only to the remainder of that amount.

(3) The original beneficiary is not liable to tax for any year after the charging year on so much of the amount mentioned in subsection (1)(a) as is—

(a) treated as arising to the subsequent recipient by section 733C, or

(b) treated as arising to the settlor by section 733E;

and the settlor is not is liable under section 733A(2) or (3) to tax for any year after the charging year on so much of the amount mentioned in subsection (1)(a) as is treated as arising to the subsequent recipient by section 733C.

(4) For the purposes of subsection (1)(d)(i)—

(a) if the amount mentioned in subsection (1)(a) is not one that is treated as arising by section 733D, “the start time” is the time the benefit mentioned in subsection (1)(b) is provided to the original beneficiary, and

(b) if the amount mentioned in subsection (1)(a) is one that is treated as arising by section 733D in connection with the operation of this section on a previous occasion, “the start time” is the time given by this subsection as the start time on that occasion.

(5) Where the onward payment is made as mentioned in subsection (1)(d)(ii), the onward payment is to be treated—

(a) for the purposes of the provisions of this section following subsection (1)(d), and

(b) for the purposes of sections 733C to 733E,

as made immediately after, and in the tax year containing, the distribution time.

(6) Where subsection (1)(d) and (e) are met in any case, it is to be presumed (unless the contrary is shown) that subsection (1)(c) is also met in that case.

(7) In this section—

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

• “the charging year” means the gift year or, if later, the matching year,

• “gift” includes any benefit,

• “the gift year” means the tax year in which the onward payment is made, but see subsection (5),

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

• “the matching year” means the first tax year in which the matching mentioned in subsection (1)(b) would occur,

• “relevantly remitted” means remitted to the United Kingdom in a tax year for which the original beneficiary is UK resident but, where an individual is liable as a result of section 733A(2) or (3) for the tax charged under section 731 on the amount mentioned in subsection (1)(a), means remitted to the United Kingdom in a tax year for which that individual is UK resident, and

• “the settlor” means the settlor of the settlement, mentioned in section 721A(3) or (4) or 729A(3) or (4), which because of subsection (1)(b)(i) is the settlement concerned.

(8) Sections 742C to 742E (value of benefit provided to a person) apply in relation to the onward payment as if references in those sections to a benefit provided were references to a gift made.

(9) Sections 809L to 809Z6 (remittance basis: rules about when income is remitted, including rule treating pre-arising remittances of deemed income as made when the income arises)—

(a) apply for the purposes of this section and sections 733C to 733E, and

(b) apply for those purposes in relation to references to remittance of the onward payment as if the onward payment were relevant foreign income of the subsequent recipient.]

Textual Amendments

F1 Ss. 733B-733E inserted (with effect for the tax year 2018-19 and subsequent years) by Finance Act 2018 (c. 3), Sch. 10 paras. 16, 21(1)