Income Tax Act 2007 section 735AF

Onward gifts from non-residents or qualifying new residents

Section 735AF targets arrangements where benefits from offshore transfers are routed through non-UK residents or qualifying new residents before being passed on to UK-resident individuals, ensuring those onward gifts are caught by the transfer of assets abroad rules.

• Where a benefit from a relevant transfer is provided to a non-UK resident (or qualifying new resident) and there are arrangements or an intention to pass it on to a UK-resident person, the onward gift is treated as a benefit arising from the original transfer.
• The onward gift must occur within three years of the original benefit being received, or before receipt if made in anticipation of it, and must consist of the original benefit, something derived from it, or other property connected with it.
• Chains of benefits are caught: where a series of transactions links the original recipient to the subsequent recipient, the entire chain is treated as a single onward gift and each benefit in the series must meet the connection test.
• There is a rebuttable presumption: if an onward gift meeting the timing and connection conditions is made, it is presumed that arrangements or an intention to pass on the benefit existed at the time the original benefit was provided, unless the contrary is shown.