Collective investment schemes: offshore funds: offshore income gains: the tax charge
The tax charge on offshore income gains
The information in this manual applies to transactions up to 30 November 2009. The Offshore Funds Manual is currently being updated for the offshore funds regime from 1 December 2009.
An offshore income gain is treated for all purposes of the Taxes Acts as income arising at the time of the disposal and as constituting profits or gains chargeable to tax under ITTOIA05/PT5/CH8 for the year of assessment or under Schedule D Case VI for the accounting period, in the case of a company, in which the disposal is made.
See SAIM6350 on losses.
The charge is imposed upon those persons who would be chargeable under taxation of chargeable gains rules (see CG10700) except that, in the case of United Kingdom trading branches of persons or individuals and permanent establishments of companies, who are neither resident nor ordinarily resident, the charge extends to assets situated outside the United Kingdom.
There are some special rules.
- Where an offshore income gain is realised by a partnership, each partner should be separately assessed in respect of his share of the Schedule D Case VI or ITTOIAO5/CH8/PT5 income.
- In the case of an individual resident or ordinarily resident but not domiciled in the UK, the remittance basis applies in relation to an offshore income gain in the same way as it would apply for Capital Gains Tax under TCGA92/S12.
- The exemption from Capital Gains Tax in TCGA92/S72 in respect of gains accruing on deemed disposals by trustees on the occasion of a person’s death, do not extend to offshore income gains.
- Where assets are held by a person as nominee or bare trustee for another person, the offshore income gain should be calculated as though it were the offshore income gain of the person for whom the asset is held.
- For discretionary and life interest trusts see TSEM3020 (SAIM20000).
- Where an offshore income gain accrues in respect of a disposal of assets made by a person holding them as trustee for a person who would be absolutely entitled as against the trustee but for being an infant, the income which is treated as arising by reference to the gain is for the purposes of ITTOIA05/PT5/CH5 (Settlements: Amounts treated as income of settlor) deemed to be paid to the infant.
- Existing tax provisions are imported either specifically or on general construction to charities, superannuation funds, life insurance companies and pension funds.
Legislation in ITA07/S716-721 (transfer of assets abroad) TCGA92/S13 (attribution to United Kingdom shareholders of chargeable gains of non-resident companies) and FA81/S80 - S84 (attribution to UK beneficiaries of chargeable gains of non-resident settlements) is applied as appropriate to offshore income gains.