Taxation of Chargeable Gains Act 1992 section 87L

Cases where settlor liable following onward gift

Section 87L redirects the capital gains tax liability onto a UK-resident settlor where a capital payment from a non-resident trust is passed on to a close member of the settlor's family.

• Where a close family member of a UK-resident settlor receives a capital payment (or an onward gift of one) from a non-resident settlement, the tax charge shifts from the family member to the settlor.
• For matching purposes, the capital payment is treated as if it had been received by the settlor as a beneficiary, not by the family member, and this applies for the year of the gift and all future years.
• Any chargeable gains that would otherwise be attributed to the close family member are instead treated as accruing to the settlor, provided the settlor is UK resident in the relevant tax year.
• The settlor can recover the full amount of tax paid from the person who received the onward payment, and can require HMRC to issue a certificate confirming the tax paid and the gains on which it was charged, which serves as conclusive evidence.