Offshore trusts—transfers between settlements—offshore income gains (OIGs) and s 2(2) amounts
Offshore trusts—transfers between settlements—offshore income gains (OIGs) and s 2(2) amounts

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • Offshore trusts—transfers between settlements—offshore income gains (OIGs) and s 2(2) amounts
  • What is a 'transfer'
  • Section 2(2) amounts
  • Rebasing and transfers between settlements
  • Offshore income gains

STOP PRESS: This Practice Note is being reviewed in light of the changes introduced by section 35 and Schedule 10 to the Finance Act 2018. For further guidance, see Practice Notes: Finance Act 2018—progress through Parliament and Changes to the taxation of offshore trusts from 6 April 2017.

Capital payments are generally taxed by matching them against available relevant income (ARI), offshore income gains (OIGs) and capital gains in that order such that, if the trust does not have any ARI, distributions are matched to OIG amounts and then finally to section 2(2) of the Taxation of Chargeable Gains Act 1992 (TCGA 1992), amounts under TCGA 1992, s 87 or Sch 4C.

For discussion of OIGs, see the Offshore trusts—offshore income gains (OIGs) Practice Note.

For discussion of matching capital payments, see the Offshore trusts—matching capital payments—section 87 TCGA 1992 and Offshore trusts—matching capital payments where the trustee borrowing rules apply—Sch 4C TCGA 1992 Practice Notes.

However, where there has been a transfer between settlements, the OIG amounts and TCGA 1992, s 2(2) amounts in each settlement are altered. As such, the tax treatment of a payment made from either settlement in the year of the transfer or subsequent years is also likely to be altered.

What is a 'transfer'

While a 'transfer' itself is not defined, the following rules do not apply