Taxation of Chargeable Gains Act 1992 section 87J

Relevant parts of payment from which onward gift derived

Section 87J defines how the original capital payment from an offshore trust is divided into component parts — the taxed matched amount, the untaxed matched amount, and the unmatched remainder — for the purposes of determining the tax treatment of onward gifts under section 87K.

• When an offshore trust makes a capital payment that is subsequently passed on to a UK resident, the original payment must be split into up to three slices: a taxed portion, an untaxed portion, and any unmatched remainder.
• Where the original payment is matched against trust gains and the recipient is UK resident without the remittance basis applying, the entire matched amount is treated as the taxed part.
• Where the remittance basis applies to the recipient, the taxed part is limited to the amount of matched gains actually remitted to the UK by the end of the gift year, with the balance forming the untaxed part.
• Where matching occurs through a Schedule 4C pool (used for trust gains attributed via certain anti-avoidance rules), the entire matched amount is treated as the taxed part with no untaxed element.

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