CG38703 | Charge on beneficiary of non-resident settlement – TCGA92/S87: Disregard of Capital Payments to non-residents for 2018-19 and later years

S87D\TCGA1992

The basic rule is where a capital payment is received by a non-UK resident beneficiary that capital payment is disregarded for the purposes of matching that payment to the section 2(2)* amounts of the non-resident trust.

Example: Capital payments are made in 2018/19 as follows:

100 to MR A a UK resident

100 to MR B a non-UK resident

Trustees section 2(2) amount 100 for 2018/19

When considering which capital payments should be matched those to Mr B are disregarded by s87D(2). Gains of 100 would be treated as accruing to Mr A for 2018/19.

For an individual they are either resident or not resident for a tax year. Where a capital payment is made to a beneficiary in a split year any gains are treated as accruing in the UK part of that year.(S87(2A) TCGA1992). So in example 1 if 2018/19 was a split year for Mr A, any gains that are matched would be treated as accruing in the UK part of that year.

Exceptions to the general rule apply if the Close Family Member or onward gift rules apply – see CG38711 onwards.

The rule in s87D(2) does not apply in the year a settlement ends (S87F\TCGA1992).

*This section was re-written for disposals from 6 April 2019 to section 1(3) see CG10150.