CG38718 - Charge on beneficiary of non-resident settlement – TCGA92/S87: Further Examples for 2018-19 and later years

Example 1. Capital payments from a non-settlor interested non-resident trust

Trustee’s s2(2)* amount £100,000 for 2018/19.

Capital payments made in 2018/19 to:

Mr A – UK resident £50,000 All matched for Mr A

Mr B – non UK resident £100,000 No matching, s87D applies to disregard.

Mrs A UK resident £50,000 All matched for Mrs A

Gains for 2018/19:

Mr A £50,000

Mrs A £50,000

Example 2. Capital payments from a non-settlor interested non-resident trust

Trustee’s s2(2)* amount £100,000 for 2019/20.

Capital payments made to:

Mr A – UK resident £10,000 (18/19), £40,000 (19/20) All matched for Mr A

Mr B – non UK resident £100,000 (18/19) No matching, s87D applies to disregard.

Mrs A UK resident £50,000 (19/20) All matched for Mrs A

Gains for 2019/20:

Mr A £50,000

Mrs A £50,000

Notes;

Capital payments of £90,000 made in and matched to gains of 2019/20

Balance of 2019/20 gains of £10,000 matched to capital payments to Mr A brought forward from 2018/19.

Example 3. Capital payments from a non-settlor interested non-resident trust

Trustee’s s2(2)* amount £80,000 for 2019/20.

Capital payments made to:

Mr A – UK resident £10,000 (18/19), £40,000 (19/20) Matched to gains of £35,556 (see A)

Mr B – Not UK resident £100,000 (18/19)

Mrs A UK resident £50,000 (19/20) Matched to gains of £44,444 (see B)

A - matching for Mr A from 19/20 (40,000/90,000) x 80,000 = £35,556

B - matching for Mr B from 19/20 (50,000/90,0000 x 80,000 = £44,444

Unmatched capital payments are:

Mr A £10,000 (18/19), £4,444 (19/20)

Mr B £100,000 disregarded for year

Mrs A £5,556 (19/20)

Example 4. Capital payments from a non-settlor interested non-resident trust

Trustee’s s2(2)* amount £120,000 for 2019/20.

Capital payments made to:

Mr A – UK resident £10,000 (18/19), £40,000 (19/20) Matched to gains of £42,727

Mr B – UK resident but leaves 19/20 (split year) £100,000 (18/19) Matched to gains of £27,273

Mrs A UK resident £50,000 (19/20) Matched to gains of £50,000

19/20 All capital payments of £90,000 matched

A – 18/19 matching for Mr A (10.000/110,000) x 30,000 = £2,727 (gains for 19/20 40,000+2,727)

B – 18/19 matching for Mrs B (100,000/110,000) x 30,000 = £27,273

Unmatched capital payments are:

Mr A £7,273 (18/19)

Mr B £72,727 (18/19) but may be disregarded in later years depending on residence position

Example 5. Capital payments from a non-settlor interested non-resident trust

Trustee’s s2(2)* amount of £195,000 2019/20

Capital payments made to:

Mr A – UK resident £10,000 (18/19) £40,000 (19/20) Matched to gains of £45,000

Mr B UK resident but leaves 19/20 (split Year) £100,000 (19/20) Matched to gains of £100,000

Mrs A – UK resident £50,000 (19/20) Matched to gains of £50,000

For Mr A (40,000 from 19/20) + (5,000 from 18/19). Unmatched capital payments from 2018/19 of £5,000

Example 6. Capital payments from a non-settlor interested non-resident trust

Trustee’s s2(2)* amount of £195,000 for 2019/20

Capital payments are made to:

Mr A – UK resident £10,000 (18/19), £40,000 (19/20) Matched to gains of £50,000

Mr B – Not resident 18/19, UK resident 19/20 (absence not within temporary non-residence rules)

£100,000 (18/19)

Mrs A – UK resident £50,000 (19/20) Matched to gains of £50,000

Unmatched gains from 2019/20 £95,000

Capital payments to Mr B are not matched in 2019/20 because they were received when not resident and are disregarded.

Example 7. Capital payments from a non-settlor interested non-resident trust

Trustee’s s2(2)* amount of £195,000 for 2019/20

Capital payments are made to:

Mr A – UK resident £10,000 (18/19), £40,000 (19/20) Matched to gains of £45,000
Mr B – Not resident 18/19 (originally left 8/15), Resident 19/20

£100,000 (18/19) Matched to gains of £100,000

Mrs A – UK resident £50,000 (19/20) Matched to gains of £50,000

For Mr A matching (40,000 from 19/20) + (5,000 from 18/19). Balance of unmatched capital payments from 2018/19 of £5,000

For Mr B although the capital payment was received while non resident, the temporary non-residence rules would apply to move receipt of the capital payment to 2019/20 and it would be matched for 2019/20.

Example 8. Settlor interested non-resident trust (s86 does not apply)

Trustee’s s2(2)* amount of £250,000 for 2019/20

Capital payments to:

Mr A – UK resident (settlor) £10,000 (18/19), £40,000 19/20

Mr B – not UK resident £100,000 (18/19)

Mrs A – UK resident – spouse of Mr A £50,000 (19/20)

Miss A – Not UK resident (under 18 at time of receipt and daughter of Mr A) £20,000 (18/19)

After application of close family member rule capital payments allocated to:

Mr A - £30,000 (18/19) and £90,000 (19/20)

Mr B - £100,000 (18/19) but disregarded as non-resident

For Mr A capital payments of £120,000 matched to gains of 2019/20.

Unmatched capital payments of £130,000 carried forward.

Unmatched and disregarded capital payments to Mr B of £100,000 (18/19) may be brought back into account if absence from UK is only temporary non-residence.

Example 9. Settlor interested non-resident trust (s86 does not apply)

Impact of s91\TCGA1992 (see CG38795 onwards) not considered in this example.

Trustee’s s2(2)* amount for 19/20 £195,000

Capital payments to:

Mr A – UK resident for 17/18, £10,000 received

UK resident for 18/19, £10,000 received

UK resident for 19/20, £40,000 received

Mr B - Not UK resident 17/18, £50,000 received

Not UK resident 18/19, £20,000 received

UK resident (absence was temporary) 19/20

Mrs A – spouse of Mr A- UK resident 18/19, £30,000 received

Mr C UK resident 17/18, £20,000 received

Not UK resident for 19/20

Miss A – daughter of settlor (born 6/4/01) UK resident 17/18, £10,000 received

Not UK resident 19/20, £30,000 received (May 19)

Allocation after application of close family member and other rules:

Mr A 17/18 £20,000 (10,000 Mr A, 10,000 Miss A)

18/19 £40,000 (10,000 Mr A, 30,000 Mrs A)

19/20 £40,000

Mr B 19/20 £70,000 (only temporary non-residence so capital payments treated as received)

Mr C 17/18 £20,000 but as non resident for 19/20 this will be disregarded for 19/20.

Mrs A Nil – close family member rule applies

Miss A Nil – close family member rule applies to capital payment 17/18, for 19/20 rule no longer applies but as not resident 19/20 capital payment is disregarded for 19/20.

Gains matched as follows for 19/20:

Mr A £100,000 (20,000 + 40,000 +40,000)

Mr B £70,000

Unmatched gains of £25,000 carried forward.

For both Mr C and Miss A if temporary non residence rules apply if they return to the UK, disregarded capital payments may be brought back into account.

Example 10. Settlor interested non-resident trust (s86 does not apply)

Trustee’s s2(2)* amount for 19/20 £120,000

Capital payments to:

Mr A – UK resident for 17/18, £10,000 received

UK resident for 18/19, £10,000 received

UK resident for 19/20, £40,000 received

Mrs A – spouse of Mr A- UK resident 18/19, £50,000 received

Mr C UK resident 17/18, £20,000 received

Not UK resident for 19/20

Miss A – 25 year old daughter of settlor Not UK resident 17/18, £20,000 received

Not UK resident 18/19, £20,000 received but onward payment of the full amount made to Mr A in the year

Not UK resident 19/20, £20,000 received

Allocation after application of close family member and other rules:

Mr A 17/18 £10,000

18/19 £80,000 (10,000 Mr A, 50,000 Mrs A, 20,000 onward payment from Miss A)

19/20 £40,000

Mr C 17/18 £20,000 but as non resident for 19/20 this will be disregarded for 19/20.

Mrs A Nil – close family member rule applies

Miss A Nil – for 17/18 and 19/20 capital payments disregarded for 19/20 as non resident. For 18/19 onward payment was made to Mr A.

Gains matched as follows for 19/20:

Mr A £120,000 (40,000 19/20 + 80,000 18/19)

Unmatched capital payments carried forward:

Mr A £10,000 from 17/18.

For both Mr C and Miss A if temporary non residence rules apply if they return to the UK, disregarded capital payments may be brought back into account.

Example 11. Capital payments from a non-settlor interested non-resident trust

Impact of s91\TCGA1992 (see CG38795 onwards) not considered in this example.

Trustee’s s2(2)* amount of £120,000 for 19/20

Capital payments to:

Mr A – UK resident for 17/18, £10,000 received

UK resident for 18/19, £10,000 received

UK resident for 19/20, £40,000 received

Mrs A – spouse of Mr A- UK resident 18/19, £50,000 received

Mr C UK resident 18/19 (and 19/20), £10,000 received with onward payment of £10,000 made to Mr A in 19/20

Allocation:

Mr A 17/18 £10,000

18/19 £10,000

19/20 £40,000

Mrs A 18/19 £50,000 (Mr A is not the settlor so close family member rule doesn’t apply)

Mr C 18/19 £10,000 (not moved because resident)

Gains matched as follows for 19/20:

Mr A £60,000 (40,000 19/20 + 10,000 18/19 + 10,000 17/18)

Mrs A £50,000 (from 18/19)

Mr C £10,000 (from 18/19)

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