Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Trust definition

What does Trust mean? A trust is a legal arrangement in which one or more trustees hold and manage property (the trust property) for the benefit of beneficiaries. It is primarily defined by case law rather than a single statute, though key rules appear in legislation (for example, writing requirements and trustee powers). Trusts arise by express declaration (usually by a settlor), by operation of law (resulting or constructive trusts), or under statute, and are used in private client, commercial, pension and charitable contexts. Core features include: the trustee’s fiduciary duties to act loyally, prudently and in accordance with the trust terms; control...

Offshore trusts—transfers between settlements: TCGA 1992 s 90; matching OIGs and s 1(3) amounts; impact on capital payments; protected settlements, rebasing and trustee borrowing rules (UK)

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Practice notes

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’?

While a ‘transfer’ is not expressly defined, these rules do not apply to transfers where:

the transfer is for consideration in money or money’s worth; and
the consideration equals or exceeds the market...

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Dhana Sabanathan

Michelmores

Dhana is a Partner in the Tax, Trusts and Succession team in London, part of the Firm's private wealth group. She joined Michelmores in 2023 from Winckworth Sherwood, where she was a Partner in the Private Business and Wealth team for over five years, and prior to that a Partner at an international law firm. Dhana's experience is in the private client and wealth management sector, where she specialises in working with high net worth and ultra-high net worth individuals, family offices, entrepreneurs, corporates and owner-managed businesses. She advises significant family offices and in addition to UK based clients, acts for clients based in Europe, the US, Asia and the Middle East.'Independently ranked' for Private Wealth Law in the Chambers High Net Worth Guide 2022 and recommended in the Legal 500, Dhana is also recognised in the Citywealth Leaders List as well as Eprivate Client. She is a...

Web page updated on 21/05/2026

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