INTM601200 | Transfer of assets abroad: The income charge: Measure of income - offshore income gains

If the person abroad makes investments in offshore funds which are ‘non-reporting funds’, and on disposal of their interest in such funds makes a profit, the offshore income gain is regarded as income.

Although there may not be income tax due from the person abroad in respect of the offshore income gain, it may be regarded as income becoming payable to a person abroad for the purposes of the transfer of assets provisions.

Whether or not the offshore income gains constitute income for the purpose of the transfer of assets provisions is dependent on the Offshore Funds (Tax) Regulations 2009 (SI 2009/3001). For years prior to 2025-2026 regulations 20, 21 and 24 determined whether an offshore income gain arising to an offshore trust would be taxed by reference to TCGA92/S87 and 87A or under the transfer of assets abroad provisions. For the tax years 2025-2026 onwards regulation 20 paragraphs (2) to (5) have been repealed meaning that from this tax year the transfer of assets abroad provisions apply to all offshore income gains arising in offshore trusts. As a consequence, from 2025-2026 all offshore income gains arising in offshore trusts will be treated as the income of a person abroad.

The Investment Funds Manual (IFM) from page IFM13000 onwards provides further information on the amount of offshore income gains to be treated as the income of the person abroad, where the offshore income gains have been attributed to a UK resident individual under the regulations.