Taxation of Chargeable Gains Act 1992 section 87M

Cases where recipient of onward gift is user of remittance basis

Section 87M deals with situations where a trust capital payment is passed on as a gift to someone who uses the remittance basis of taxation, and sets out how the onward gift rules interact with the remittance basis.

• Where trust gains or capital payments are attributed to a remittance basis user through the onward gift rules, and the settlor is not made liable instead, the payment is treated as if it were received directly by the remittance basis user from the trustees.
• If chargeable gains are attributed to a remittance basis user through an onward gift, and none or only part of those gains are remitted to the UK in that tax year, the unremitted portion is treated as a new capital payment received by the person at the time the gift was made, allowing the onward gift rules to operate again on that amount.
• The unremitted amount treated as a new capital payment is regarded as entirely "matched" and entirely "untaxed" for the purposes of determining the relevant parts of the payment from which the onward gift is derived, and the gains originally attributed to the person are reduced by the amount of that new capital payment.
• Where the capital payment feeding into the onward gift rules is itself one that arose from this recycling mechanism, modified rules apply so that the onward gift provisions can continue to operate on further successive gifts of unremitted amounts.