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

Recipients of onward gifts

Section 643I sets out the conditions under which onward gifts — where a benefit received from a settlement is passed on to the settlor or a close family member — are subject to special tax treatment, and determines which subsequent sections (643J to 643L) apply.

• Where income is treated as arising to an original beneficiary under section 643A but that person is not taxed on it, and the benefit is passed on within three years to the settlor or a close family member who is expected to be UK resident at the time, sections 643J to 643L come into play
• The original beneficiary is relieved from tax on any amount that is instead treated as arising to the subsequent recipient or the settlor under sections 643J or 643L
• An onward payment is treated as made immediately after the original benefit is provided, and covers direct or indirect gifts of the benefit itself, anything derived from it, or any other property connected to it
• Where the original beneficiary is non-UK resident or uses the remittance basis and none of the income has been remitted to the UK, the onward gift rules redirect the tax charge to the subsequent recipient or the settlor as appropriate