IFM13425 | Effect of section 87 attribution rules on offshore income gains arising in non-resident settlement structures up to 5 April 2025

Up to 5 April 2025, if offshore income gains arose to the trustees of a non-resident settlement then, for the tax year in which the gains arise, you considered first if they could be attributed to a beneficiary using attribution rules from section 87 TCGA (regulation 20(2)). These rules were applied with necessary modifications to the capital gains legislation to make it work with offshore income gains (regulation 20(3)).

These attribution rules also applied where the offshore income gains arose to a non-resident company underlying the non-resident settlement. Section 13 TCGA applied, with necessary modifications, to attribute offshore income gains arising in a non-resident company (regulation 24). Where the offshore income gain arose to a non-resident company underlying a non-resident settlement section 13(10) TCGA allowed the offshore income gain to be attributed to the trustees of the non-resident settlement. The attribution rules from section 87 TCGA could then apply to attribute it to a beneficiary of the settlement. (Part 1 of TCGA 1992 was rewritten by the Finance Act 2019 – section 13 was rewritten to sections 3 to 3G.)

Similarly attributions could be made via section 89 or Schedule 4C TCGA where those rules applied instead of section 87 TCGA.

Where there were both offshore income gains and capital gains in a non-resident settlement structure then any capital payments were matched first with offshore income gains (regulation 20(4)).

General guidance on how section 87 TCGA and related provisions work in relation to capital gains is available from the Capital Gains Manual from CG38570.