Taxation of Chargeable Gains Act 1992 section 87

Attribution of gains to beneficiaries

Section 87 provides a mechanism for taxing beneficiaries of non-UK resident settlements on chargeable gains realised by the trustees, by matching capital payments received by beneficiaries against the trust's gains.

• Where trustees of a settlement are not UK resident at any time during a tax year, the trust's chargeable gains are calculated as if the trustees were UK resident, and these gains (the "section 1(3) amount") are then available to be matched against capital payments made to beneficiaries.
• Capital payments received by beneficiaries are matched against the trust's section 1(3) amount, and the beneficiary is treated as having a chargeable gain equal to the matched amount (or matched part) in the year of matching — not necessarily the year the payment was received.
• The section 1(3) amount is reduced where gains have already been attributed to the settlor under section 86, and gains relating to disposals already within the charge to CGT on non-UK residents (under section 1A) or carried interest gains (under section 103KA) are excluded to prevent double taxation.
• Whether the beneficiary actually pays CGT on the attributed gain depends on normal residence rules; if the beneficiary is not UK resident, the trust's section 1(3) amount is still reduced by the matched amount even though no tax is charged, and if the tax year is a split year for the beneficiary, gains are treated as accruing in the UK part of that year.