CG38711 - Charge on beneficiary of non-resident settlement – TCGA92/S87: Capital Payment treated as received by settlor where the Close Family Member rule applies for 2018-19 and later years
S87G and S87H\TCGA1992
Where a non-resident trust is settlor interested s86\TCGA1992 may apply to attribute the gains of the trustee’s to the settlor see CG38430+. If s86 does not apply say for example the settlor is not domiciled (and not deemed domiciled) then s87 may still apply. For guidance on s86 see CG38430 onwards.
If at the time a beneficiary receives a capital payment they are a ‘close family member’ of the settlor and the settlor is resident in the UK in that year the capital payment is treated as if it was received by the settlor.
A ‘close family member’ is defined in S87H and is:
The settlors spouse or civil partner at the time or
A child (who has not reached 18) of the settlor or their spouse or civil partner at the time.
Where two persons are living together as if they were spouses or civil partners are treated as if they were spouses or civil partners.
Example
Miss B who is UK resident and under 18 receives a capital payment of £1,000 in 2018/19 from the trustees of a non-resident settlement for which her father Mr B was the settlor.
If Mr B was UK resident for 2018/19 the capital payment would be treated as received by Mr B. If Mr B was not UK resident for 2018/19 the capital payment would remain as a capital payment received by Miss B.
If Capital Gains Tax is chargeable on the settlor as a result of the operation of s87G(2) and the subsequent matching of that capital payment to the trustees section 2(2)* amount, the settlor is entitled to recover that tax from the original recipient. If requested an officer of HMRC should give the settlor a certificate specifying-
- the amount of the tax paid and
- the amount of the gains on which the tax is paid.
There is no specific form of certificate that must be used and the necessary information can be provided in a letter.
*This section was re-written for disposals from 6 April 2019 to section 1(3) see CG10150.