Does the residence status of trustees affect the attribution of Schedule 4C gains to beneficiaries?

No. Paragraph 10 of Schedule 4C of the Taxation of Chargeable Gains Act 1992 provides that the residence status of the trustees of any relevant settlement is entirely irrelevant when attributing gains to beneficiaries. It does not matter whether the trustees are currently UK resident, were previously UK resident, or have never been UK resident.

Can Schedule 4C gains be attributed to UK-resident beneficiaries if the trustees are based outside the UK?

Yes. Under paragraph 10, HMRC can attribute Schedule 4C gains to UK-resident beneficiaries regardless of where the trustees are based. This rule closes a potential loophole that might otherwise allow gain attribution to be avoided by ensuring that trustees are non-UK resident at the time capital payments are made.

Are there any exceptions to the rule that trustee residence is irrelevant under paragraph 10?

Yes. Paragraph 10 is subject to one limited exception found in paragraph 9(3) of Schedule 4C, which deals with circumstances in which certain capital payments are to be disregarded. In those specific situations, the residence status of the trustees may remain relevant to the attribution of gains to beneficiaries.

What is the practical significance of paragraph 10 of Schedule 4C TCGA 1992?

The practical significance is that arrangements cannot be structured to avoid the attribution of Schedule 4C gains simply by locating trustees outside the United Kingdom. This ensures that UK-resident beneficiaries who receive capital payments remain subject to gain attribution under paragraph 8, regardless of trustee residence.

Taxation of Chargeable Gains Act 1992 Schedule 4C paragraph 10

Residence of trustees from whom capital payment received

Paragraph 10 of Schedule 4C establishes that the UK residence status of the trustees of a relevant settlement has no bearing on whether gains can be attributed to beneficiaries under the Schedule 4C rules.

The residence status of the trustees of any relevant settlement is irrelevant when attributing Schedule 4C gains to beneficiaries.
It does not matter whether the trustees are currently UK resident or have been UK resident at any point in the past.
This rule ensures that the attribution of gains to beneficiaries cannot be avoided simply because the trustees are based outside the UK.
There is one limited exception: the rule is subject to the specific provision in paragraph 9(3) of Schedule 4C, which deals with the disregard of certain capital payments.

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