What does section 3G of the Taxation of Chargeable Gains Act 1992 provide?

Section 3G provides supplementary rules supporting the attribution of gains of non-UK resident close companies to UK resident participators. It addresses the tax treatment of payments made by companies on behalf of individuals and sets out how gains and losses of non-UK resident companies are to be calculated for attribution purposes.

Is a payment by a non-UK resident company to settle a participator's capital gains tax liability treated as taxable income?

No. Under section 3G, where a company pays tax on behalf of a UK resident individual who has had gains attributed under section 3, that payment is not treated as a taxable amount. The disregard applies for income tax, capital gains tax and corporation tax purposes, preventing any additional unintended tax charge on the individual.

How are gains and losses of a non-UK resident close company calculated under section 3G?

Gains or losses accruing to the non-UK resident company are calculated as though the company were UK resident and chargeable to corporation tax on the gain. This ensures standard UK computational rules, including allowable deductions, indexation where applicable, and other reliefs, are applied consistently when determining amounts attributed to participators.

Does the section 3G disregard apply only to payments made by the company that realised the gain?

No. The disregard applies whether the paying company is the one that made the gain or an intermediary company through which the individual holds an indirect participation. Any company in the ownership chain that pays tax on the individual's behalf benefits from the rule, ensuring no taxable receipt arises for the individual.

Taxation of Chargeable Gains Act 1992 section 3G

Supplementary provisions

Section 3G provides supplementary rules supporting the attribution of gains of non-UK resident close companies to UK resident participators, dealing with the tax treatment of payments made by companies on behalf of individuals and how gains and losses are to be calculated.

Where a company pays tax on behalf of a UK resident individual who has had gains attributed to them under section 3, that payment is not treated as a taxable payment to the individual.
This applies whether the paying company is the one that made the gain or an intermediary company through which the individual holds an indirect participation.
The disregard of the payment applies for income tax, capital gains tax and corporation tax purposes.
Gains or losses accruing to the non-UK resident company are calculated as though the company were UK resident and chargeable to corporation tax on the gain.

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