IFM13436 - Example showing how a UK resident but non-UK domiciled beneficiary may benefit from a ‘rebasing’ election - paragraph 101 Schedule 7 FA 2008

Example of effect of ‘rebasing’ election - paragraph 101 Schedule 7 FA 2008

A settlement with non-UK resident trustees is settlor interested because the settlor can benefit. The trustees own all the share capital of a non-UK resident company. Neither the trustees nor the company has received any income nor made any chargeable gains. The trustees have made a ‘rebasing’ election under paragraph 126 Schedule 7 FA 2008.

The non-resident company purchased a material interest in an offshore fund in 2000-01. This is disposed of in 2010-11 resulting in an OIG amount of £60,000. The post 5 April 2008 element of that OIG amount is £15,000.

The first capital payments made to beneficiaries were made in 2010-11. They were:

  • £40,000 to a UK resident and domiciled beneficiary
  • £40,000 to a UK resident but non-UK domiciled beneficiary
  • £40,000 to a non-UK resident beneficiary.

There is a matching of £20,000 of each of these capital payments with the 2010-11 OIG amount. Each beneficiary has £20,000 of offshore income gain attributed to them via section 87 TCGA rules. There are no unmatched OIG amounts to carry forward within the non-resident settlement structure.

The UK resident and domiciled beneficiary is chargeable to income tax in 2010-11 on the £20,000 offshore income gain attributed to them. The UK resident but non-UK domiciled beneficiary (where the remittance basis is used) is only chargeable to income tax on £5,000 (£20,000 x £15,000/£60,000) of the £20,000 offshore income gain attributed to them.

That is the post 5 April 2008 element of the £20,000 offshore income gain attributed to them. This is by virtue of paragraph 101 Schedule 7 FA 2008.

The non-UK resident beneficiary is not chargeable to income tax on any of the £20,000 offshore income gain attributed to them.

There are unmatched capital payments of £20,000 to each beneficiary to carry forward at 5 April 2011.

The effect of this relief was preserved, from April 2025, by s53(3) and (4) of the Finance Act 2026. This was achieved deeming the income that is treated as arising to an individual by matching the offshore income gains with benefits received by an individual under the Transfer of Assets Abroad provisions to constitute ‘non-chargeable income’ to the extent the conditions in this relief would have applied to limit the individual’s charge to income tax on the offshore income gain that would have been treated as arising to them to if the provisions had not been repealed. For more details on the Transfer of Assets Abroad provisions, see INTM600000.