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Income Tax (Trading and Other Income) Act 2005

Type Public General Act

Publication 2005-03-24

Last updated 2026-01-20

State In force

Department Statute Law Database

Source legislation.gov.uk

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See section 783AR for definitions relevant to this subsection.

(3) In this Chapter references to a trade include references to a profession or vocation.

783AB

(1) For the purposes of this Chapter, an individual's “miscellaneous income” for a tax year is all the income arising to the individual in the tax year which would be chargeable to income tax under Chapter 8 of Part 5 (income not otherwise charged) for the tax year.

(2) But if—

(a) the individual qualifies for rent-a-room relief for the tax year, and

(b) the individual has rent-a-room receipts for the tax year which would, apart from Chapter 1 of Part 7, be chargeable to income tax under Chapter 8 of Part 5,

the rent-a-room receipts are not miscellaneous income.

(3) The reference in subsection (1) to the amount which would be chargeable to income tax under Chapter 8 of Part 5 is to the amount which would be so chargeable—

(a) apart from this Chapter, and

(b) if no deduction were made for expenses or any other matter.

783AC

(1) For the purposes of this Chapter, an individual's “relevant income” for a tax year is the sum of the following—

(a) the receipts for the tax year of the individual's relevant trades for the tax year, and

(b) the individual's miscellaneous income for the tax year.

(2) In subsection (1)(a) the reference to the receipts of a trade for a tax year is to all the amounts which would, apart from this Chapter, be brought into account as a receipt in calculating the profits of the trade for the tax year.

783AD

(1) For the purposes of this Chapter, an individual's trading allowance for a tax year is £1,000.

(2) The Treasury may by regulations amend subsection (1) so as to substitute a higher sum for the sum for the time being specified in that subsection.

Full relief

783AE

(1) An individual qualifies for full relief for a tax year if—

(a) the individual has relevant income for the tax year,

(b) the relevant income does not exceed the individual's trading allowance for the tax year, and

(c) no election by the individual under section 783AL has effect for the tax year (election for full relief not to be given).

(2) An individual also qualifies for full relief for a tax year if—

(a) the individual has relevant income for the tax year which consists of or includes receipts of one or more relevant trades,

(b) the relevant income exceeds the individual's trading allowance for the tax year,

(d) no election by the individual under section 783AL has effect for the tax year, and

(e) no election by the individual under section 783AM has effect for the tax year (election for partial relief).

(3) The conditions are that—

(a) the cash basis applies for the tax year in relation to one or more of the trades mentioned in subsection (2)(a);

(b) the individual's relevant income would not exceed the individual's trading allowance for the tax year if it were to be assumed that an election by the individual under section 25C(1) had effect for the tax year, in relation to one or more of the trades mentioned in paragraph (a)

(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

783AF

(1) This section applies if—

(a) an individual qualifies for full relief for a tax year, and

(b) the individual's relevant income for the tax year consists of or includes receipts of one or more relevant trades.

(2) The profits or losses of each such trade for the tax year are treated as nil.

783AG

(1) This section applies if—

(a) an individual qualifies for full relief for a tax year, and

(b) the individual's relevant income for the tax year consists of or includes miscellaneous income.

(2) The amount of—

(a) the miscellaneous income arising in the tax year, less

(b) any expenses associated with that income,

is treated as nil.

Partial relief

783AH

An individual qualifies for partial relief for a tax year if—

(a) the individual has relevant income for the tax year,

(b) the relevant income exceeds the individual's trading allowance for the tax year, and

783AI

(1) This section applies if—

(a) an individual qualifies for partial relief for a tax year, and

(b) the individual's relevant income for the tax year consists of or includes receipts of one or more relevant trades.

(2) The profits or losses for the tax year of each of the individual's relevant trades are given by taking the following steps—

Step 1 Calculate the total of all the amounts which would, apart from this Chapter, be brought into account as a receipt in calculating the profits of the trade for the tax year.

Step 2 Subtract the deductible amount.

...

(3) Subject to section 783AK, the deductible amount is equal to the individual's trading allowance for the tax year.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

783AJ

(1) This section applies if—

(a) an individual qualifies for partial relief for a tax year, and

(b) the individual's relevant income for the tax year consists of or includes miscellaneous income.

(2) The amount of miscellaneous income chargeable to income tax for the tax year is—

(a) the miscellaneous income for the tax year, less

(b) the deductible amount.

(3) Subject to section 783AK, the deductible amount is equal to the individual's trading allowance for the tax year.

783AK

(1) This section applies where the individual's relevant income for the tax year includes—

(a) receipts of a relevant trade, and

(b) receipts of any other relevant trade or miscellaneous income (or both).

(2) The references in section 783AI and (where it applies) section 783AJ to the deductible amount are to amounts which, in total, equal the individual's trading allowance for the tax year.

(3) The question of how to allocate the individual's trading allowance for the tax year for the purposes of subsection (2) is to be decided by the individual, subject to subsections (4) and (5).

(4) The deductible amount in respect of a relevant trade must not be such that the amount given by step 2 of section 783AI(2) is negative.

(5) The deductible amount in respect of miscellaneous income must not be such as to result in the individual making a loss in the transactions giving rise to the miscellaneous income.

Elections

783AL

(1) An individual may elect not to be given full relief for a tax year (see sections 783AF and 783AG).

(2) An election must be made on or before the first anniversary of the normal self-assessment filing date for the tax year for which the election is made.

783AM

(1) An individual may elect for partial relief to be given for a tax year if the individual's relevant income for the tax year exceeds the individual's trading allowance for the tax year (see sections 783AI and 783AJ).

(2) An election must be made on or before the first anniversary of the normal self-assessment filing date for the tax year for which the election is made.

Exclusions from relief

783AN

(1) No relief under this Chapter is given to an individual for a tax year if—

(a) the individual qualifies for rent-a-room relief for the tax year,

(b) the individual has rent-a-room receipts mentioned in subsection (2) for the tax year, and

(2) The rent-a-room receipts mentioned in subsection (1) are—

(a) rent-a-room receipts which would, apart from Chapter 1 of Part 7 (rent-a-room relief), be brought into account in calculating the profits of a trade, or

(b) rent-a-room receipts which would, apart from Chapter 1 of Part 7, be chargeable to income tax under Chapter 8 of Part 5 (income not otherwise charged).

(3) Condition A is that—

(a) the individual's total rent-a-room amount for the tax year does not exceed the individual's limit for the tax year (see section 783AR), and

(b) an election by the individual under section 799 has effect to disapply full rent-a-room relief for the tax year.

(4) Condition B is that—

(a) the individual's total rent-a-room amount for the tax year exceeds the individual's limit for the tax year, and

(b) no election by the individual under section 800 has effect to apply the alternative method of calculating profits for the tax year.

783AO

No relief under this Chapter is given to an individual for a tax year if—

(a) the individual has relevant income for the tax year, and

(b) the income includes a payment made by, or on behalf of, a person at a time when the individual is—

(i) an employee of the person, or

(ii) the spouse or civil partner of an employee of the person.

783AP

No relief under this Chapter is given to an individual for a tax year if—

(a) the individual has relevant income for the tax year, and

(b) the income includes a payment made by, or on behalf of, a firm at a time when the individual is—

(i) a partner in the firm, or

(ii) connected with a partner in the firm.

783AQ

(1) No relief under this Chapter is given to an individual for a tax year if—

(a) the individual has relevant income for the tax year, and

(b) the income includes a payment made by, or on behalf of, a close company at a time when the individual is—

(i) a participator in the close company, or

(ii) an associate of a participator in the close company.

(2) In this section “associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454).

Interpretation

783AR

In this Chapter—

(a) “rent-a-room relief”, “rent-a-room receipts” and “total rent-a-room amount” have the same meanings as in Chapter 1 of Part 7 (rent-a-room relief: see sections 784, 786 and 788), and

(b) references to “the individual's limit” are to be construed in accordance with section 789 (the individual's limit for the purposes of rent-a-room relief).

CHAPTER 2 — Property allowance

Introduction

783B

(1) This Chapter gives relief to an individual on certain income of a relevant property business (see sections 783BA and 783BB).

(2) The form of relief depends on whether the individual's relevant property income exceeds the individual's property allowance (see sections 783BC and 783BD).

(3) If the individual's relevant property income does not exceed the individual's property allowance, the income is not charged to income tax (unless the individual elects otherwise) (see sections 783BE and 783BF).

(4) If the individual's relevant property income does exceed the individual's property allowance, the individual may elect for an alternative method of calculating the income (see sections 783BG to 783BI).

(5) Any provision of this Chapter which gives relief is subject to sections 783BL to 783BP, which specify circumstances in which relief under this Chapter is not given.

Basic definitions

783BA

(1) Subject to subsection (3), for the purposes of this Chapter an individual's property business is a “relevant property business” for a tax year if the business is not a rent-a-room property business in relation to the individual for the tax year.

(2) For the purposes of subsection (1) a property business is a “rent-a-room property business” in relation to an individual for a tax year if—

(a) the individual qualifies for rent-a-room relief for the tax year, and

(b) all the receipts which would, apart from Chapter 1 of Part 7 (rent-a-room relief), be brought into account in calculating the profits of the business, are rent-a-room receipts.

See section 783BQ for definitions relevant to this subsection.

(3) If an individual receives—

(a) property income distributions which are treated as profits of a UK property business by virtue of regulation 69Z18(1) or (2) of the AIF Regulations (property AIF distributions: liability to tax), or

(b) distributions which are treated as profits of a UK property business by virtue of section 548(6) of CTA 2010 (REIT distributions: liability to tax),

that separate property business (see regulation 69Z18(6) of the AIF Regulations and section 549(5) of CTA 2010) is not a relevant property business of the individual.

(4) In subsection (3) “the AIF Regulations” means the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964).

783BB

(1) For the purposes of this Chapter, the “relievable receipts” of an individual's relevant property business for a tax year are all the amounts which would, apart from this Chapter, be brought into account as a receipt in calculating the profits of the business for the tax year.

This is subject to subsections (2) and (3).

(2) If—

(a) the individual qualifies for rent-a-room relief for the tax year, and

(b) the individual has rent-a-room receipts for the tax year which would, apart from Chapter 1 of Part 7, be brought into account in calculating the profits of the property business,

the rent-a-room receipts are not relievable receipts of the business.

(3) Non-relievable balancing charges in respect of the property business for the tax year are not relievable receipts of the business.

(4) In subsection (3) “non-relievable balancing charges”, in respect of a property business for a tax year, means balancing charges falling to be made for the tax year under Part 2 of CAA 2001 which do not relate to a business or transaction which is carried on, or entered into, for the purpose of generating receipts which are relievable receipts of the property business.

783BC

For the purposes of this Chapter, an individual's “relevant property income” for a tax year is the relievable receipts for the tax year of the individual's relevant property businesses for the tax year.

783BD

(1) For the purposes of this Chapter, an individual's property allowance for a tax year is £1,000.

(2) The Treasury may by regulations amend subsection (1) so as to substitute a higher sum for the sum for the time being specified in that subsection.

Relief if relevant property income does not exceed property allowance

783BE

An individual qualifies for full relief for a tax year if—

(a) the individual has relevant property income for the tax year,

(b) the relevant property income does not exceed the individual's property allowance for the tax year, and

(c) no election by the individual under section 783BJ has effect for the tax year (election for full relief not to be given).

783BF

(1) If an individual qualifies for full relief for a tax year, this section applies in relation to the calculation of the profits of the individual's relevant property business for the tax year or, where the individual's relevant property income for the tax year consists of the relievable receipts of two relevant property businesses, the profits of each property business for the tax year.

(2) The following are not brought into account—

(a) the relievable receipts of the property business for the tax year, and

(b) any expenses associated with those receipts.

Relief if relevant property income exceeds property allowance

783BG

An individual qualifies for partial relief for a tax year if—

(a) the individual has relevant property income for the tax year,

(b) the relevant property income exceeds the individual's property allowance for the tax year, and

783BH

(1) If an individual qualifies for partial relief for a tax year, this section applies in relation to the calculation of the profits of the individual's relevant property business for the tax year or, where the individual's relevant property income for the tax year consists of the relievable receipts of two relevant property businesses, the profits of each property business for the tax year.

(2) The relievable receipts of the property business for the tax year are brought into account.

(3) No relevant expenses are brought into account.

(4) The deductible amount is brought into account.

(5) Subject to section 783BI, the deductible amount is equal to the individual's property allowance for the tax year.

(6) In subsection (3) “relevant expenses” means all the amounts—

(a) which would, apart from this section, be brought into account as a deduction in calculating the profits of the business for the tax year, and

(b) which are associated with the relievable receipts.

783BI

(1) This section applies where the individual's relevant property income for the tax year consists of the relievable receipts of two relevant property businesses.

(2) The references in section 783BH to the deductible amount are to amounts which, in total, equal the individual's property allowance for the tax year.

(3) The question of how to allocate the individual's property allowance for the tax year for the purposes of subsection (2) is to be decided by the individual, subject to subsection (4).

(4) The deductible amount in respect of a relevant property business must not be such as to result in a loss of the business.

Elections

783BJ

(1) An individual may elect not to be given full relief for a tax year (see section 783BF).

(2) An election must be made on or before the first anniversary of the normal self-assessment filing date for the tax year for which the election is made.

783BK

(1) An individual may elect for partial relief to be given for a tax year if the individual's relevant property income for the tax year exceeds the individual's property allowance for the tax year (see section 783BH).

(2) An election must be made on or before the first anniversary of the normal self-assessment filing date for the tax year for which the election is made.

Exclusions from relief

783BL

No relief under this Chapter is given to an individual for a tax year if, in calculating the individual's liability to income tax for the tax year, a tax reduction under section 274A (property business: relief for non-deductible costs of a dwelling-related loan) is applied at Step 6 of the calculation in section 23 of ITA 2007.

783BM

(1) No relief under this Chapter is given to an individual for a tax year if—

(a) the individual qualifies for rent-a-room relief for the tax year,

(b) the individual has rent-a-room receipts for the tax year which would, apart from Chapter 1 of Part 7 (rent-a-room relief), be brought into account in calculating the profits of a property business, and

(2) Condition A is that—

(a) the individual's total rent-a-room amount for the tax year does not exceed the individual's limit for the tax year (see section 783BQ), and

(b) an election by the individual under section 799 has effect to disapply full rent-a-room relief for the tax year.

(3) Condition B is that—

(a) the individual's total rent-a-room amount for the tax year exceeds the individual's limit for the tax year, and

(b) no election by the individual under section 800 has effect to apply the alternative method of calculating profits for the tax year.

783BN

No relief under this Chapter is given to an individual for a tax year if—

(a) the individual has relevant property income for the tax year, and

(b) the income includes a payment made by, or on behalf of, a person at a time when the individual is—

(i) an employee of the person, or

(ii) the spouse or civil partner of an employee of the person.

783BO

No relief under this Chapter is given to an individual for a tax year if—

(a) the individual has relevant property income for the tax year, and

(b) the income includes a payment made by, or on behalf of, a firm at a time when the individual is—

(i) a partner in the firm, or

(ii) connected with a partner in the firm.

783BP

(1) No relief under this Chapter is given to an individual for a tax year if—

(a) the individual has relevant property income for the tax year, and

(b) the income includes a payment made by, or on behalf of, a close company at a time when the individual is—

(i) a participator in the close company, or

(ii) an associate of a participator in the close company.

(2) In this section “associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454).

Interpretation

783BQ

In this Chapter—

(a) “rent-a-room relief”, “rent-a-room receipts” and “total rent-a-room amount” have the same meanings as in Chapter 1 of Part 7 (rent-a-room relief: see sections 784, 786 and 788), and

(b) references to “the individual's limit” are to be construed in accordance with section 789 (the individual's limit for the purposes of rent-a-room relief).

Foreign maintenance payments

Partial relief: alternative calculation of chargeable miscellaneous income

Deductible amount: splitting of trading allowance

Plant or machinery used for other qualifying activities

Transitional provision about protected foreign-source income and transitional trust income

643A

(1) If—

(a) an individual to whom this section applies has an untaxed benefits total for a settlement for a tax year (see section 643B),

(b) there is available protected income in relation to the individual, the settlement and the tax year (see section 643C), and

an amount equal to so much of the untaxed benefits total as does not exceed the available protected income is treated for income tax purposes as income of the individual for the tax year.

(2) This section applies to—

(a) the settlor, and

(b) anyone who has at any time been a close member of the settlor’s family.

(3) If there is a choice about the individuals in whose case income is to be treated as arising under subsection (1), income is to be treated as arising—

(a) to such one or more of them as appears to an officer of Revenue and Customs to be just and reasonable, and

(b) if more than one, in such respective proportions as appear to the officer to be just and reasonable.

643B

(1) For the purposes of section 643A, whether an individual has an untaxed benefits total for a settlement for a tax year (“the current year”), and (if so) its amount, are determined as follows—

Step 1Identify each benefit provided by the trustees to the individual—in the current tax year, or an earlier tax year for which the individual was UK resident, andif the individual is not the settlor, at a time when the individual was a close member of the settlor’s family.

Step 2 Identify the amount or value of each benefit identified in the individual's case at Step 1, and calculate the total of those amounts and values.

Step 3 Take the total calculated at Step 2 and deduct from it the following—any part of it on which the individual is liable to income tax otherwise than under section 643A,any income treated by section 643A, 643J or 643L as arising, to a person for a tax year earlier than the current year, by reference to any of the benefits identified in the individual's case at Step 1,where the whole or part of a benefit identified in the individual's case at Step 1 is taken into account in charging income tax under Chapter 2 of Part 13 of ITA 2007, the amount or value of so much of the benefit as is taken into account in doing that, andany amount required to be deducted by section 643D(2) (gains treated as accruing in a year before the current year).

Step 4 If the result of the calculation at Step 3 is an amount greater than nil, that amount is the individual's untaxed benefits total for the settlement for the current year.

(2) For the purposes of Step 1 in subsection (1), if—

(a) the trustees provide a benefit to an individual in a given tax year,

(b) the individual is a close member of the settlor’s family when the benefit is provided,

(d) the settlor is UK resident for the tax year,

the benefit is instead treated as provided to the settlor.

(3) Sections 742C to 742E of ITA 2007 (value of certain benefits) apply for the purpose of calculating the value of a benefit for the purposes of this section as they apply for the purpose of calculating an income tax charge under Chapter 2 of Part 13 of ITA 2007.

(4) In this section and sections 643C to 643EA, a reference to a benefit provided by trustees of a settlement is to—

(a) a benefit treated by subsection (6) as provided by the trustees, or

(b) any other benefit if it is provided by the trustees directly, or indirectly, out of—

(i) property comprised in the settlement, or

(ii) income arising under the settlement.

(5) In this section and sections 643C to 643EA, a reference to a benefit provided by trustees of a settlement to an individual is to—

(a) a benefit treated by subsection (6) as provided by the trustees to the individual, or

(b) any other benefit if it is provided by the trustees to the individual directly, or indirectly, out of—

(i) property comprised in the settlement, or

(ii) income arising under the settlement.

(6) Where—

(a) income arises under a settlement, and

(b) the income, before being distributed, is the income of a person other than the trustees,

a benefit is for the purposes of subsection (4)(a) treated as provided by the trustees and is for the purposes of subsection (5)(a) treated as provided by the trustees to the person.

(7) A benefit treated as provided by subsection (6) is treated—

(a) as consisting of the income mentioned in that subsection, but after any reduction in accordance with Chapter 8 of Part 9 of ITA 2007 for trustees' expenses, and

(b) as provided at the time that income arises.

643C

(1) For the purposes of section 643A, take the following steps to determine the amount of available protected income in relation to an individual (“P”), a settlement and a tax year (“the current tax year”)—

Step 1Identify the total amount of protected foreign-source income and transitional trust income that arose (at any time) under the settlement (“the total protected income”).

Step 2Deduct any amount of the total protected income that is matched under the transfer of assets abroad code in the current tax year or an earlier tax year.

Step 3Deduct any amount of the total protected income on which P or any other individual is liable to income tax in the current tax year or an earlier tax year.

Step 4Deduct any amount that, in relation to the settlement, is treated under section 643A as P’s income in an earlier tax year or as another individual’s income in any tax year.

Step 5Add back the amount of any income falling within Step 4 that is identified as qualifying foreign income on a foreign income claim made by P or any other individual for any tax year.

(2) For the purposes of Step 1 in subsection (1), ignore section 648(3) to (5) (foreign income treated as “arising” under settlement only if and when remitted).

(3) For the purposes of Step 2 in subsection (1), an amount of the total protected income is “matched under the transfer of assets abroad code” if it is matched under section 735A of ITA 2007 with—

(a) benefits provided by the trustees to P or any other individual in the current tax year or in an earlier tax year, and

(b) an amount of income treated as arising to P or any other individual under section 732 of ITA 2007

(or if it would be so matched if section 735A applied for those purposes).

(4) For the purposes of Step 3 in subsection (1), ignore any liability to income tax arising under section 643A above or under section 731 of ITA 2007 (transfer of assets abroad: benefits charge).

(5) In Step 4 in subsection (1) and in subsection (4), a reference to section 643A includes, in relation to any of the tax years 2018-19 to 2024-25, section 643J and 643L (old onward gifting rules).

643D

(1) Subsection (2) applies if—

(a) in the case of a settlement, benefits provided to an individual as mentioned at Step 1 in section 643B(1) are received in a tax year, and

(b) chargeable gains are treated by section 87, 87K, 87L or 89(2) of, or paragraph 8 of Schedule 4C to, TCGA 1992 as accruing to a person in that or a subsequent tax year by reference (direct or indirect) to the whole or part of any benefits so provided.

(2) In the calculation under section 643B of the individual's untaxed benefits total for the settlement for any tax year after the one in which such chargeable gains are so treated, the amounts to be deducted at Step 3(d) of that calculation include the amount of those gains.

(3) References in this section to chargeable gains treated as accruing to an individual include offshore gains treated as arising to the individual (see regulations 20 and 22 to 24 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001)).

643E

(1) Where any tax for which the settlor of a settlement is liable as a result of section 643B(2) (benefit received by close family member attributed to settlor) is paid, the settlor is entitled to recover the amount of the tax from the individual concerned.

(2) For the purpose of recovering that amount, the settlor is entitled to require an officer of Revenue and Customs to give the settlor a certificate specifying—

(a) the tax year in which income is treated under section 643A as arising to the settlor,

(b) the amount of income treated as arising, and

and any such certificate is conclusive evidence of the facts stated in it.

643F

(1) This section applies where—

(a) in the case of a settlement, income (“the deemed income”) was treated by section 643A as arising to an individual for any of the tax years 2018-19 to 2024-25, and

(b) section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to the individual for that year.

(2) The deemed income is treated as relevant foreign income of the individual.

(3) In the application of section 832 to the deemed income, subsection (2) of that section has effect with the omission of paragraph (b).

(4) For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance basis) treat a benefit, or any protected income, that relates to any part of the deemed income as deriving from that part of the deemed income.

(5) In subsection (4) “relates” has the meaning given by section 643G.

(6) In this section and section 643G—

“protected income” means the income that under section 643C formed PFSI in the calculation of the settlement's available protected income in the case of the relevant individual for the year, and

“the relevant individual”—where the deemed income was treated as income of an individual by section 643A(1)(a) both before and after the application of section 643A(3) and (4), means that individual, andwhere the deemed income was treated as income of the settlor by section 643A(3) or (4) after having been treated as income of another individual by section 643A(1), means that other individual.

(7) A reference in this section to section 643A or 643C (or to any provision of that section) is to that section (or provision) as it had effect for the tax year in which the deemed income was treated as arising to the individual.

643G

(1) In this section—

(a) references to a step are to a step under section 643B(1) as it applied in the case of the settlement, the year and the relevant individual,

(aa) references to section 643A, 643J or 643L (or to a provision of any of those sections) are to that section (or provision) as it had effect for the year,

(b) “protected income” and “the relevant individual” have the meaning given by section 643F(6), and

(2) For the purposes of section 643F(4)—

(a) place the benefits identified at Step 1 in the order in which they were received by the relevant individual (starting with the earliest benefit received),

(b) where a deduction was allowed by any of paragraphs (a), (c) and (d) of Step 3 by reference to the whole or part of any of those benefits, reduce the benefit by the amount of the deduction,

(d) where the whole or part of an item of the protected income was, in respect of benefits provided by the trustees in the year or in any earlier tax year, taken into account in charging income tax under Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) for the year or any earlier tax year, reduce the item by so much of itself as was so taken into account,

(e) where the whole or part of an item of the protected income was, by reference to benefits provided by the trustees to individuals other than the relevant individual, treated by section 643A or 643J or 643L as income for the year or any earlier tax year, reduce the item by so much of itself as was so treated,”

(f) place the income treated by section 643A(1) (before the application of section 643A(3) and (4)) as arising to the relevant individual in respect of the benefits referred to in paragraph (a) in the order in which it was treated as arising (starting with the earliest income treated as having arisen), and

(g) treat the income mentioned in paragraph (f) as related to—

(i) the benefits referred to in paragraph (a), and

(ii) the protected income,

by matching the income mentioned in paragraph (f) with those benefits and the protected income (in the orders mentioned in paragraphs (a), (c) and (f)).

(3) For the purposes of subsection (2)(d), the whole or part of an item of the protected income is to be treated as taken into account in respect of a benefit so far as the item or part—

(a) is matched under section 735A of ITA 2007 with notional income with which the benefit is matched under that section, or

(b) would be matched under that section (if it applied also for this purpose) with notional income with which the benefit would be matched under that section (if it applied also for this purpose),

and here “notional income” means income which is treated as arising under section 732 of ITA 2007.

643H

(1) For the purposes of sections 643A to 643EA, a person is a close member of the family of the settlor of a settlement at any time if the settlor is living at that time and—

(a) the person is the settlor's spouse or civil partner at that time, or

(b) the person—

(i) is a child of the settlor, or of a person who at that time is the settlor's spouse or civil partner, and

(ii) at that time has not reached the age of 18.

(2) For the purposes of subsection (1), two people living together as if they were a married couple or civil partners are treated as if they were spouses or civil partners of each other.

643I

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

643J

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

643K

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

643L

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

643M

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

643N

(1) This section applies in relation to income if—

(a) the income was treated as arising to an individual for the tax year 2024-25 or an earlier tax year—

(i) by section 643J(3) and (4) where section 643J(3) applied because of section 643J(2), or

(ii) by section 643L, and

(b) section 809B, 809D or 809E of ITA 2007 (remittance basis) applied to the individual for that year.

(2) The income is treated as relevant foreign income of the individual.

(3) For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance basis) treat the onward payment referred to in section 643I(1)(d), or (as the case may be) the part of it whose amount or value is equal to the amount of the income, as deriving from the income.

(4) In the application of section 832 in relation to the income, subsection (2) of that section has effect with the omission of its paragraph (b).

(5) A reference in this section to section 643I, 643J or 643L (or to a provision of any of those sections) is to that section (or provision) as it had effect for the tax year in which income was treated as arising to the individual.

Deductible amount: splitting of trading allowance

Abbreviations and general index in Schedule 4

Plant or machinery used for care business

848A

(1) This section applies if—

(a) a partner in a firm is partner as trustee for a beneficiary who is absolutely entitled to the partner's share of the profits of the firm, and

(b) the beneficiary is chargeable to tax on those profits.

(2) References in this Part to a partner or member of the firm include references to the beneficiary.

852A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

855A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Claims for relevant foreign income to be charged on the remittance basis

Meaning of “caravan”

Interpretation: Northern Ireland

M's contribution to the limited liability partnership: the basic calculation

Overview of Part 10

Penalties, interest and VAT surcharges and interest : non-trades etc.

Interpretation: Northern Ireland

16A

(1) This section applies if a payment is made by a relevant authority to a person where—

(a) the person holds a voluntary office with the authority,

(b) the person carries out the duties of the office in a period in which he or she also carries on a trade, profession or vocation,

(c) the payment is made solely to compensate the person for lost profits for the period (and accordingly does not exceed the amount of those profits), and

(d) the payment would otherwise be dealt with under Part 2 of ITEPA 2003 by virtue of section 4(2)(b).

(2) The payment is dealt with under this Part.

(3) In subsection (1)(c) “lost profits” means the difference between—

(a) the amount of profits that the person would have received from the trade, profession or vocation for the period if he or she had not carried out the duties of the office, and

(b) the amount of profits that the person did receive from the trade, profession or vocation for the period.

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

“relevant authority” has the meaning given by section 299A of ITEPA 2003;references to a person holding a voluntary office are to be construed in accordance with section 299A(2) and (3) of that Act.

16B

(1) This section applies where—

(a) a company (“the paying company”) makes a payment to, or for the benefit of, a director of the paying company in respect of the director’s employment as a director of the paying company,

(b) the payment would otherwise be employment income of the director chargeable to tax under Part 2 of ITEPA 2003,

(c) the director was or is a member of a firm, or was appointed by a company (“the appointing company”) other than the paying company, and

(d) condition A or B is met.

(2) The payment is to be treated for income tax purposes as a receipt of—

(a) a trade carried on by the firm, or

(b) a trade carried on by the appointing company.

(3) Condition A applies where the director is a member of a firm, and is that—

(a) the director carries on a profession,

(b) being a director of a company is a normal incident of that profession and of membership of the firm,

(d) the amount of the payment is insubstantial, compared with the total amount brought into account as receipts when calculating the firm’s profits.

(4) Condition B applies where the director is appointed by a company, and is that—

(a) the profits of the appointing company are within the charge to income tax,

(b) by virtue of an agreement with the appointing company, the director is required to account for the payment to that company, and

(5) This subsection applies if the appointing company had the right to appoint the director by virtue of its shareholding in, or an agreement with, the paying company.

(6) This subsection applies if the appointing company is not one over which—

(a) the director has control, or

(b) any person connected with the director has control, or

(7) For the purposes of subsection (6), the following persons are connected with the director: the spouse, civil partner, parent, child, son-in-law or daughter-in-law of the director.

16C

(1) This section applies where—

(a) a payment is received by an individual who carries on a profession (alone or in partnership),

(b) the payment is made to the individual in his or her capacity as an employee or office-holder, but is not made in respect of employment as a director of a company,

(d) the conditions in subsection (3) are met, and

(e) where the individual carries on the profession in partnership, the condition in subsection (4) is also met.

(2) The payment is to be treated for income tax purposes as a receipt of a trade carried on by the individual or, where the individual carries on the profession in partnership, by the firm.

(3) The conditions referred to in subsection (1)(d) are that—

(a) the time spent by the individual in performing the duties of the office or employment is insubstantial compared with the time spent by the individual in carrying on the profession,

(b) the office or employment is related to the profession carried on by the individual,

(i) the total amount brought into account as receipts when calculating the individual’s trade profits; or

(ii) where the individual carries on a profession in partnership, so much of the total amount brought into account as receipts when calculating the firm’s profits as is attributable to the individual.

(4) The condition referred to in subsection (1)(e) is that the individual is required by the terms of the partnership agreement to account to the firm for the payment and does so.

782C

(1) No liability to income tax arises in respect of a payment by a relevant authority to a person if—

(a) the person performs services for the authority for no financial benefit in a period in which he or she is also employed,

(b) the payment is made solely to compensate the person for lost employment income for the period (and accordingly does not exceed the amount of that income), and

(c) the person does not perform the services as the holder of an office with the authority (as to which, see section 299A of ITEPA 2003).

(2) For the purposes of subsection (1) a person performs services for no financial benefit if, at the time the payment referred to in that subsection is made, the person—

(a) is not entitled to any payment or benefit in connection with performing the services,

(b) has not received any such payment or benefit, and

(3) For the purposes of subsection (2)(a), (b) and (c) disregard—

(a) a payment in respect of reasonable expenses incurred in performing the services,

(b) a payment compensating the person for loss of social security income arising as a result of performing the services, and

(4) In subsection (1)(b) “lost employment income” means the difference between—

(a) the amount of employment income, after deduction of tax and national insurance contributions, that the person would have received from the employment for the period if he or she had not performed the services, and

(b) the amount of employment income, after deduction of tax and national insurance contributions, that the person did receive from the employment for the period.

(5) In this section—

“employment” has the meaning given by section 4 of ITEPA 2003;

“relevant authority” has the meaning given by section 299A of ITEPA 2003;

“services” includes services as a juror;

“social security income” has the meaning given by section 657 of ITEPA 2003.

Unpaid remuneration: non-trades and non-property businesses

Condition C

Commencement and transitional provisions etc.

Abbreviations and general index in Schedule 4

Activities in UK sector of continental shelf

148GA

(1) This section applies if—

(a) for the whole or part of any period of account, a person carrying on a trade, profession or vocation is the lessee of any plant or machinery under a right-of-use lease that is a long funding finance lease,

(b) there is a change in the amounts payable under the lease, and

(i) a remeasurement of the lease liability is shown in the person's accounts for the period of account, or

(ii) a deduction is shown in those accounts other than as an interest expense under the lease or an amount of depreciation, or an impairment, in respect of the right-of-use asset arising from the lease.

(2) In calculating the profits of the person's trade, vocation or profession for the period of account, the amount deducted in respect of amounts payable under the lease (after taking account of any limitation as a result of section 148G) is to be increased or decreased so as to take account of the remeasurement or deduction mentioned in subsection (1)(c).

(3) No adjustment is to be made under subsection (2) if the remeasurement or deduction results in the person being treated by section 70D of CAA 2001 (long funding finance lease: additional expenditure: allowances for lessee) as having incurred further capital expenditure on the provision of the plant or machinery.

CHAPTER 2A — Offshore receipts in respect of intangible property

Charge to tax on offshore receipts in respect of intangible property

608A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

608B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

608C

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

608D

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608E

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608F

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608G

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608H

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608I

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exemptions

608J

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

608K

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

608L

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

608M

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

608N

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Recovery of tax from person in same control group

608O

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

608P

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

608Q

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608R

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608S

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608T

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608U

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608V

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General

608W

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

608X

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

608Y

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interpretation: general

608Z

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Excess profit allocation to non-individual partners

Interpretation: Scotland

Commencement and transitional provisions etc.

Repeals and revocations

608GA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

608JA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

608MA

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

608MB

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

608MC

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commencement and transitional provisions etc.

Abbreviations and general index in Schedule 4

Rule if person starts to carry on business after 31 March

275A

(1) This section applies if, in a tax year (“the relevant tax year”), the person carrying on the business—

(a) starts to carry it on after 31 March, and

(b) does not permanently cease to carry it on.

(2) For the purposes of this Part—

(a) the profits or losses of the business of the relevant tax year are treated as nil, and

(b) the actual profits or losses of the business of the relevant tax year are treated as arising in the following tax year.

Rule if there is a late accounting date

275B

(1) This section applies if, in a tax year (“the relevant tax year”), the person carrying on the business—

(a) does not start to carry it on or starts to carry it on before 1 April,

(b) does not permanently cease to carry it on, and

(2) For the purposes of this Part—

(a) the profits or losses of the business of the period beginning with the day after the accounting date and ending with 5 April in the relevant tax year are treated as nil, and

(b) the actual profits or losses of the business of that period are treated as arising in the following tax year.

(3) In this section, “accounting date” in relation to a tax year means—

(a) the date in the tax year to which accounts are drawn up, or

(b) if there are two or more such dates, the latest of them.

Election to disapply late accounting date rules

275C

(1) The person carrying on the business may make an election under this section.

(2) If an election under this section has effect for a tax year, neither of sections 275A and 275B apply in relation to the business for that tax year.

(3) An election under this section—

(a) must be made on or before the first anniversary of the normal self-assessment filing date for the first tax year for which it is to have effect, and

(b) has effect for that tax year and the four tax years following that tax year (subject to subsection (4)).

(4) If the person permanently ceases to carry on the business before the end of the last of the tax years mentioned in subsection (3)(b), the election has effect for each tax year up to and including the tax year immediately before the tax year in which the person permanently ceases to carry on the business.

679A

(1) The part of the aggregate income of the estate from which a sum within section 668(1)(b) is treated as paid is determined by applying assumptions A and B in that order.

(2) Assumption A is that if there are different persons with an absolute interest in the residue of the estate, such apportionments of the aggregate income of the estate in respect of those interests are to be made as are just and reasonable for the different interests.

(3) Assumption B is that sums are paid from the income to which a person’s share of the residuary estate relates in descending order, starting with the income bearing income tax at the highest rate and ending with the income bearing income tax at the lowest rate (subject to subsection (3A)).

(3A) For the purposes of assumption B, where that income includes—

(a) income bearing income tax at 0% by virtue of section 680(1A), and

(b) other income bearing income tax at 0%,

sums are to be paid from income within paragraph (a) after income within paragraph (b).

(4) If some, but not all, of the aggregate income of the estate is income within section 680, assumption C is applied before assumptions A and B.

(5) Assumption C is that the basic amount is paid from income that is not within section 680 before it is paid from income within that section.

(6) Assumptions A and B then apply—

(a) first to determine the part of the income not within that section from which the basic amount is paid, and

(b) then to determine the part of the income within that section from which the basic amount is paid.

680B

(1) This section applies to estate income relating to a person’s interest in the residue of an estate so far as that interest relates to income that—

(a) falls within section 664(2)(a) (income of personal representatives charged to UK income tax), and

(b) is savings income (see section 18 of ITA 2007).

(2) The income is treated as being savings income.

828A

(1) This section provides for increases in the amounts specified in—

(a) section 808(2) (the fixed amount), and

(b) section 811(1A) and (2)(a) and (b) (the amount per adult or child),

if the consumer prices index for the September before the start of a tax year is higher than it was for the previous September.

(2) The amount specified in section 808(2) for the tax year is found as follows—

Step 1: multiply the amount for the previous tax year by the same percentage as the percentage increase in the consumer prices index.

Step 2: if the result of Step 1 is a multiple of £10, it is the increase for the tax year.If the result of Step 1 is not a multiple of £10, round it up to the nearest amount which is a multiple of £10 and that amount is the increase for the tax year.

Step 3: add the increase for the tax year to the amount for the previous tax year and the result is the amount for the tax year.

(3) The amounts specified in section 811(1A) and (2)(a) and (b) for the tax year are found as follows—

Step 1: multiply the amount for the previous tax year by the same percentage as the percentage increase in the consumer prices index.

Step 2: if the result of Step 1 is a multiple of £5, it is the increase for the tax year.If the result of Step 1 is not a multiple of £5, round it up to the nearest amount which is a multiple of £5 and that amount is the increase for the tax year.

Step 3: add the increase for the tax year to the amount for the previous tax year and the result is the amount for the tax year.

(4) Before the start of the tax year the Treasury must make an order replacing the amounts specified in the provisions listed in subsection (1) with the amounts which, as a result of this section, are the amounts for the tax year.

(5) In this section “consumer prices index” means the all items consumer prices index published by the Statistics Board.

776A

(1) No liability to income tax arises in respect of a payment that is made—

(a) by way of training allowance under the Jobs Growth Wales Plus scheme, and

(b) to a person as a participant in that scheme.

(2) For this purpose the “Jobs Growth Wales Plus scheme” means the scheme under section 14 of the Education Act 2002 known as Jobs Growth Wales Plus.

Apportionment etc of profits to tax year

7A

(1) This section and sections 7B to 7D apply if a period of account of a person carrying on a trade (“the trader”) does not coincide with a tax year.

(2) Any of the following steps may be taken if they are necessary in order to arrive at the profits or losses of the trade of the tax year—

(a) apportioning the profits or losses of a period of account to the parts of that period falling in different tax years, and

(b) adding the profits or losses of a period of account (or part of a period) to profits or losses of other periods of account (or parts).

(3) The steps must be taken by reference to the number of days in the periods concerned.

(4) But the trader may use a different way of measuring the length of the periods concerned if—

(a) it is reasonable to do so, and

(b) the way of measuring the length of periods is used consistently for the purposes of the trade.

(5) Sections 7B and 7C contain rules for the purpose of avoiding the need to apportion profits or losses under this section (and section 7D makes provision for the trader to elect for those rules not to apply).

(6) This section and sections 7B to 7D apply to professions and vocations as they apply to trades.

Rule if trader starts to carry on trade after 31 March

7B

(1) This section applies if, in a tax year (“the relevant tax year”), the trader—

(a) starts to carry on the trade after 31 March, and

(b) does not permanently cease to carry on the trade.

(2) For the purposes of this Chapter—

(a) the profits or losses of the trade of the relevant tax year are treated as nil, and

(b) the actual profits or losses of the trade of the relevant tax year are treated as arising in the following tax year.

Rule if there is a late accounting date

7C

(1) This section applies if, in a tax year (“the relevant tax year”), the trader—

(a) does not start to carry on the trade or does so before 1 April,

(b) does not permanently cease to carry on the trade, and

(2) For the purposes of this Chapter—

(a) the profits or losses of the trade of the period beginning immediately after the accounting date and ending with 5 April in the relevant tax year are treated as nil, and

(b) the actual profits or losses of the trade of that period are treated as arising in the following tax year.

(3) In this section, “accounting date” in relation to a tax year means—

(a) the date in the tax year to which accounts are drawn up, or

(b) if there are two or more such dates, the latest of them.

Election to disapply late accounting date rules

7D

(1) The trader may make an election under this section in relation to the trade.

(2) If an election under this section has effect for a tax year, neither of sections 7B and 7C apply in relation to the trade for that tax year.

(3) An election under this section—

(a) must be made on or before the first anniversary of the normal self-assessment filing date for the first tax year for which it is to have effect, and

(b) has effect for that tax year and the four tax years following that tax year (subject to subsection (4)).

(4) If the trader permanently ceases to carry on the trade before the end of the last of the tax years mentioned in subsection (3)(b), the election has effect for each tax year up to and including the tax year immediately before the tax year in which the trader permanently ceases to carry on the trade.

Professions and vocations

Basis of accounting

24A

(1) The profits of a trade for a tax year must be calculated on the cash basis, unless—

(a) the trade is an excluded trade in relation to the tax year (see section 25B), or

(b) an election under section 25C (1) has effect in relation to the trade for the tax year.

(2) In this Part—

(a) references to calculating the profits of a trade on the cash basis are references to doing so in accordance with this section, and

(b) references to a trade in relation to which the cash basis applies are to a trade the profits of which are required by virtue of subsection (1) to be calculated on the cash basis.

(3) Chapter 3A contains provision about the calculation of profits on the cash basis and the application of the rest of this Part in relation to the cash basis.

(4) Where the cash basis applies in relation to a trade, sections 27, 28 and 30 do not apply in relation to the calculation of the profits of the trade.

(5) This section does not affect provisions of the Income Tax Acts relating to the calculation of the profits of Lloyd's underwriters.

25B

(1) A trade is an excluded trade in relation to a tax year if the trade meets any of conditions A to G.

(2) Condition A is that—

(a) the person who is or has been carrying on the trade is a firm, and

(b) one or more of the persons who have been partners in the firm at any time during the tax year was not an individual at that time.

(3) Condition B is that the person who is or has been carrying on the trade was a limited liability partnership at any time during the tax year.

(4) Condition C is that an election under Chapter 8 (trade profits: herd basis rules) has effect in relation to the trade for the tax year.

(5) Condition D is that a claim under Chapter 16 (claim for averaging of fluctuating profits) has been made in relation to the trade for the tax year.

(6) Condition E is that, at any time within the period of 7 years ending immediately before the tax year, the person who is or has been carrying on the trade obtained an allowance under Part 3A of CAA 2001 (business premises renovation allowances) in relation to the trade.

(7) Condition F is that the trade is or was at any time during the tax year a mineral extraction trade within the meaning of Part 5 of CAA 2001 (see section 394(2) of that Act).

(8) Condition G is that—

(a) at any time before the beginning of the tax year the person who is or has been carrying on the trade obtained an allowance under Part 6 of CAA 2001 (research and development allowances) in respect of qualifying expenditure incurred by the person in relation to the trade, and

(b) the person owns an asset representing the expenditure.

In this subsection “qualifying expenditure” has the same meaning as in Part 6 of CAA 2001.

(9) The Treasury may by regulations amend this section.

(10) A statutory instrument containing regulations under subsection (9) that restricts the circumstances in which an election may be made under section 25C may not be made unless a draft of the instrument containing the regulations has been laid before, and approved by a resolution of, the House of Commons.

25C

(1) A person who is or has been carrying on a trade, other than an excluded trade, may elect for the profits of the trade to be calculated in accordance with generally accepted accounting practice (instead of on the cash basis).

(2) An election made in relation to a trade under subsection (1) has effect—

(a) for the tax year for which it is made, and

(b) for every subsequent tax year (subject to subsection (3)).

(3) An election made in relation to a trade under subsection (1) ceases to have effect if—

(a) the trade is an excluded trade in relation to a tax year, or

(b) the person who is or has been carrying on the trade, other than an excluded trade, elects to calculate its profits for a subsequent tax year on the cash basis.

(4) Subsection (3) does not prevent an election being made under subsection (1) for any subsequent tax year.

(5) For the meaning of “excluded trade”, see section 25B.

Rules relating to calculation of profits

Animals kept for trade purposes

Rules relating to deductions

Timing and amount of certain qualifying benefits

Profits calculated before end of 9 month period

Business entertainment: exceptions

Employee-ownership trusts

401ZA

(1) This section applies where—

(a) there has been a disposal of ordinary share capital of a company (“C”) to the trustees of a settlement,

(b) the relief requirements are met in relation to the disposal,

(c) C has made a payment to the trustees that is a distribution to the trustees chargeable to income tax as a result of this Chapter or Chapter 4 (dividends from non-UK resident companies), and

(d) the payment was made for the purposes of meeting the trustees’ acquisition costs.

(2) On the making of a claim, so much of the trustees’ acquisition costs may be deducted from the distribution (whether chargeable under this Chapter or Chapter 4) as—

(a) does not reduce the amount of the distribution below nil, and

(b) has not been deducted from any other distribution.

(3) The “relief requirements” means the requirements set out in section 236H(4) of TCGA 1992 (disposals to employee-ownership trusts), but those requirements have effect for the purposes of this section as if references to “P” were to the person making the disposal whether or not that person is a company.

(4) For the purposes of this section, the trustees’ acquisition costs are sums expended by the trustees on—

(a) the acquisition of ordinary share capital in C by the trustees that resulted from the disposal;

(b) the repayment of any sums borrowed to fund that acquisition;

(c) the payment of interest on any such sums or in respect of any deferral of consideration for the disposal to the extent the payment is not in respect of interest exceeding a reasonable commercial rate;

(d) any valuation of C carried out in connection with the acquisition;

(e) any liability to stamp duty or stamp duty reserve tax on the acquisition;

(f) such other reasonable expenses as are directly connected with the acquisition (but this does not include any expenses incurred in connection with the ownership of the ordinary share capital once acquired).

643ZA

(1) In this Chapter—

“protected foreign-source income” means income that—arose under a settlement in any of the tax years 2017-18 to 2024-25, andwas protected foreign-source income for that tax year within the meaning of section 628A (as that section had effect for that tax year).

“transitional trust income” means income that—arose under a settlement in any of the tax years 2008-09 to 2016-17, andwas transitional trust income throughout the tax years 2017-18 to 2024-25 within the meaning of section 628C (as that section had effect for those tax years).

(2) For the purposes of subsection (1) ignore section 648(3) to (5) (foreign income treated as arising under settlement only if and when remitted).

643ZB

(1) The rules in sections 624(1) and 629(1) do not apply to protected foreign-source income or transitional trust income (which, by virtue of section 648(3) to (5), may be treated as income arising under the settlement in the tax year 2025-26 or a subsequent tax year).

(2) In the following provisions, “income” does not include protected foreign-source income or transitional trust income—

section 635(2) and (3)(d)(i);

section 636(1), (2) (in the words before paragraph (a)), (4) and (6);

section 637(5) and (7A).

643EA

(1) Subsection (2) applies if—

(a) the trustees of a settlement provide a benefit (“the original benefit”) to an individual (“the original recipient”),

(b) the original recipient—

(i) is liable neither to income tax nor to capital gains tax by reference to the amount or value of the original benefit, or

(ii) is a qualifying new resident for the tax year in which the original benefit is provided,

(c) section 643B(2) (close family member’s benefits attributed to settlor) does not apply to the provision of the original benefit to the original recipient,

(d) at the time when the original benefit is provided—

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

(ii) it is reasonable to expect that, if the whole or part of the original benefit is passed on to another person in accordance with the arrangements or intention, that other person will be UK resident when they receive at least part of what is passed on to them,

(e) the original recipient provides a benefit (“the onward gift”) to another person (“the subsequent recipient”)—

(i) at the time when the original benefit is provided to the original recipient, or at any later time in the 3 years beginning with the day containing that time, or

(ii) at any time before the original benefit is provided to the original recipient and, it is reasonable to assume, in anticipation of the original benefit’s being provided,

(f) the onward gift is of or includes—

(i) the whole or part of the original benefit,

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

(iii) any other property, but only if the original benefit is provided with a view to enabling or facilitating, or otherwise in connection with, the property’s being provided to the subsequent recipient, and

(g) the subsequent recipient—

(i) is the settlor, or

(ii) is a close member of the settlor's family at the time when they receive the onward gift or, where the onward gift is provided as mentioned in subsection (1)(e)(ii), at the time given by subsection (4).

(2) So much of the onward gift as falls within subsection (1)(f) is treated for the purposes of section 643B(1) and (2)(a) as a benefit provided by the trustees to the subsequent recipient at the time when the onward gift is provided.

(3) For the purposes of subsection (1)(e), the circumstances in which the original recipient provides a benefit to the subsequent recipient include circumstances where there is a series of two or more benefits starting with a benefit provided by the original recipient and ending with a benefit provided to the subsequent recipient; and in such a case—

(a) the onward gift is treated for the purposes of subsection (1)(e) as provided when the final benefit in the series is provided, and

(b) the reference to the onward gift in subsection (1)(f) is to be read as a reference to each benefit in the series.

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