CG73990 - NRCG and the exemptions: Disposals from 6 April 2019: Attribution of gains to other persons

Attribution of gains to members of non-resident companies under TCGA92/S3

TCGA92/S3 contains anti-avoidance legislation, the broad aim of which is to prevent people in the UK from setting up non-resident companies which they control for the purpose of holding assets, to keep gains on those assets outside the scope of CGT and CT. Where S3 applies, it attributes gains realised by non-resident companies (which would be close if UK resident) to UK resident participators in the company (or participators that are non-UK close companies or non-UK resident trustees of a settlement).

To prevent double taxation, S3 does not apply to the part of a gain where the company would otherwise also be subject to a charge to non-resident CG.

Example

A non-UK resident close company disposes of a residential property. The property was acquired in 2010 and disposed of in 2020.

Any part of the overall gain arising on disposal that relates to the period from 6 April 2015 would be within the scope of the non-resident CG rules. S3 would continue to apply to the part of the gain arising before 6 April 2015.

Attribution of gains to settlors with interest in non-resident settlements under TCGA92/S86

TCGA92/S86 serves to prevent people in the UK setting up non-resident trusts to keep gains outside the scope of CGT and CT (see CG38430+).

Where gains accrue to non-resident trusts in respect of any settled property “originating from the settlor”, that would be chargeable gains under TCGA92/S1(3). These gains are attributed to settlors who have an interest in the trust and are chargeable to CGT.

Non-resident trustees are taxable on the part of the gain that is within the NRCG provisions i.e. the part that relates to the period after 5 April 2015 (for residential property) or after 5 April 2019 (for non-residential property and indirect disposals).

To avoid double taxation the part of a gain caught by the NRCG provisions is excluded from the calculation of the s1(3) amount by s86(4ZA) and is therefore not included in the amount available to be attributed to the settlor.

Attribution of gains to beneficiaries of non-resident settlements under TCGA92/S87

TCGA92/S87 imposes a charge on beneficiaries of non-resident trusts where S86 does not apply (see CG38570+). Gains accruing to non-UK resident trustees (the s1(3) amounts) are treated as chargeable gains accruing to beneficiaries, to the extent that the beneficiaries receive matched capital payments from the trustees.

Non-resident trustees are taxable on the part of the gain that is within the NRCG provisions i.e. the part that relates to the period after 5 April 2015 (for residential property) or after 5 April 2019 (for non-residential property and indirect disposals).

To avoid double taxation the part of a gain caught by the NRCG provisions is excluded from the calculation of the s1(3) amount by s87(5A) and is therefore not included in the amount available to be matched to capital payments.

Transfers of value by trustees, attribution of gains to beneficiaries under TCGA92/Sch 4C

TCGA92/Sch 4C is part of a series of anti-avoidance provisions introduced to counter ‘flip flop’ schemes, involving trustees of a non-resident trust borrowing funds on the value of settled property and making loans to another trust. In broad terms, gains on deemed disposals are attributed to the settlor or else are allocated to beneficiaries in receipt of capital payments (see CG39100+).

To avoid double taxation the part of a gain caught by the NRCG provisions is excluded from the calculation of the chargeable amount by Sch 4C Para 4(3) and is therefore not included in the amount available to be matched to capital payments.