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TAXguide 03/19: Finance Act 2018 section 35 and schedule 10 – settlements anti-avoidance

Technical release

Published: 21 Mar 2019 Update History

This TAXguide has been prepared by committee members of STEP, ICAEW, the CIOT and the Law Society to highlight practical issues and uncertainties raised by Finance Act 2018 Schedule 10 (Settlements: Anti-avoidance etc.).


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.


This guide is intended to assist professional advisers in considering the issue. It does not constitute advice and is not a substitute for professional consideration of the issues by such a professional adviser in each client’s specific context. As such, no liability is assumed to any person in respect of this guide.

More guidance

ICAEW, STEP, CIOT and The Law Society have produced a series of guides on changes to the taxation of foreign domiciliaries introduced by Finance Act (No 2) Act 2017 and Finance Act 2018. Covering: CGT, IHT, cleansing mixed funds, trust protections, offshore income gains and settlements anti-avoidance.

TAXguide 03/19

Tax Faculty members and ICAEW members can download this guidance in full.