Overview

In broad terms the effect of the legislation is as follows:

• A UK resident settlor is taxed on gains which might otherwise be attributed to a close family member under the capital gains tax beneficiary charges (FA 2018 schedule 10 inserting TCGA 1992 sections 87G/H). 
• Income tax or CGT is imposed in certain cases on UK residents who receive a gift within three years of the donor receiving a capital distribution or benefit from a non-UK resident trust. This is the so-called ‘onward gift’ rule. 
• The income tax settlements code is extended to tax benefits received by certain settlors and close family members. Benefits are matched with untaxed protected foreign source income (PFSI) in the trust. (FA 2018 schedule 10 inserting ITTOIA 2005 sections 643A-H). 
• The matching of trust gains with capital payments received by a non-UK resident beneficiary is ended. (FA 2018 schedule 10 inserting new TCGA 1992 section 87D et seq.) 

TAXguide 03/19 highlights practical issues and uncertainties raised. Its contents have not been agreed by or commented on by HMRC and no part of this TAXguide should be taken as representing HMRC’s views.