Offshore income gains (OIG) meaning

Louwman v HMRC [2025] UKFTT 295 (TC) This appeal examined the taxpayer’s income tax liabilities for the 2018–19, 2019–20 and 2020–21 tax years. She was resident and domiciled in the UK throughout, having become deemed domiciled on 6 April 2018. Before that, she had settled shares into four offshore trusts. Those shares were in companies holding investments that produced offshore income gains (OIG) and accrued income profits (AIP) in the years in question. In outline, OIG are gains realised on disposing of an interest in an offshore fund that does not report its income to HMRC, while AIP are profits arising on the disposal of securities to the extent they represent built-up interest. As a general rule, OIG and AIP are treated as income of the year of disposal for the person making the disposal, or anyone treated as doing so. Owing to her deemed UK domicile, the remittance basis was not available in those years. Absent anything further, the OIG and AIP within the trusts (via the companies)...

Private Client England & Wales glossary A Abatement When, after settling the deceased’s funeral costs, debts and liabilities, the remaining estate cannot satisfy all legacies in full, the gifts are reduced accordingly, unless the Will shows a different intention. In a solvent estate, the order for reduction appears in Part II of Schedule 1 to the Administration of Estates Act 1925. Refer to Practice Note: Payment of legacies. Accruals basis Where income is taxed on an accruals basis, it is attributed to a given tax year by reference to the number of days within that year during which the activity giving rise to the liability accrued. See Practice Note: What is the basis of income tax?. Accumulation and maintenance (A&M) trust A form of non‑interest in possession trust designed to benefit children and young people up to 25, which received favourable inheritance tax treatment between 1975 and 2006. See Practice Note: Accumulation and maintenance trusts—IHT [Archived]. Accredited Legal Representative (ALR) ...

STOP PRESS: Abolition of non-dom regime and introduction of residence-based IHT regime Finance Act 2025 (FA 2025), which received Royal Assent on 20 March 2025, delivers the repeal of the remittance basis and introduces a residence-based system with effect from 6 April 2025. FA 2025 also replaces domicile as the principal criterion for determining exposure to inheritance tax. Updates to the rules for determining excluded property status Abolition of the protected settlements status for offshore trusts Changes to overseas workday relief For details on these measures, see: Practice Notes: The abolition of the remittance basis of taxation from 2025–26 and A new residence-based regime for IHT from 2025–26. A non-reporting offshore fund is any offshore fund that does not have reporting fund status for a particular period of account. For what constitutes an offshore fund, see Practice Note: Tax and offshore funds—what is an offshore fund?. For information on reporting funds, see Practice Notes: Tax and offshore funds—the reporting fund...

Capital payments are generally taxed by setting them against available relevant income (ARI), offshore income gains (OIGs) and then capital gains, in that sequence respectively. Accordingly, where a trust has no ARI, distributions are matched first with OIG figures and ultimately with amounts then referable to section 1(3) of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) (formerly s 2(2)), and those arising under TCGA 1992, s 87 or Schedule 4C. For commentary on OIGs, see the Practice Note: Offshore trusts—offshore income gains (OIGs). For guidance on matching capital payments, see Practice Notes: 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. Where there has been a transfer between settlements, the OIG figures and the s 1(3) amounts within each settlement are correspondingly adjusted accordingly. Accordingly, the tax treatment of any payment made from either settlement in the transfer year, or in later years, is likewise likely to be altered. What is a ‘transfer’? ...