Income Tax (Trading and Other Income) Act 2005 section 643EA

Onward gifts from non-residents or qualifying new residents

Section 643EA targets arrangements where trust benefits are routed through a non-UK-resident or qualifying new resident individual to avoid tax, by treating onward gifts to the settlor or their close family as if they had been provided directly by the trustees.

• Where trustees provide a benefit to someone who is not liable to UK income tax or capital gains tax on it (or who is a qualifying new resident), and that person passes on the benefit (or something derived from it) to the settlor or a close family member, the onward gift is treated as a benefit provided directly by the trustees.
• The onward gift must be made within three years after the original benefit, or even before it if made in anticipation of it, and there must have been arrangements or an intention at the time of the original benefit for it to be passed on to a UK-resident person.
• Where the conditions about the onward gift, its connection to the original benefit, and the identity of the subsequent recipient are all met, it is presumed (unless the taxpayer can demonstrate otherwise) that the necessary arrangements or intention existed at the time of the original benefit.
• The provision also catches indirect chains of benefits — where the original benefit passes through a series of intermediaries before reaching the settlor or close family member — and treats the entire chain as a single onward gift for these purposes.