Taxation of Chargeable Gains Act 1992 section 86

Attribution of gains to settlors with interest in non-resident or dual resident settlements

Section 86 deals with how chargeable gains arising in offshore or dual-resident trusts can be attributed back to a UK-resident settlor who retains an interest in the settlement, effectively treating those gains as the settlor's own for capital gains tax purposes.

• Where a UK-resident settlor has an interest in a qualifying settlement whose trustees are either non-UK resident throughout the tax year or are treated as resident outside the UK under a double taxation agreement, the trustees' chargeable gains are attributed to the settlor as if they were the settlor's own gains.
• The gains attributed to the settlor are calculated by assuming the trustees were UK resident (or that the double taxation agreement did not apply), meaning the gains that would have been taxable on the trustees are instead taxed on the settlor.
• Certain gains are excluded from the attribution: gains already within the charge to capital gains tax on non-UK residents (for example, gains on UK property disposals) and carried interest gains are disregarded to prevent a double tax charge.
• Where a settlor's tax year is a split year under the statutory residence test, the attributed gains are treated as accruing only in the UK part of that year; Schedule 5 contains detailed supplementary rules including exceptions that may prevent the section from applying.