beta This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Capital Gains Manual

Charges in respect of non-resident settlements

Charges on the trustees

With one very limited exception trustees of a non-resident settlement are not liable to Capital Gains Tax because they are not resident in the UK.

The only circumstance in which trustees of a non-resident settlement are liable to Capital Gains Tax is if they carry on a trade in the UK through a branch or agency, TCGA92/S10. This is uncommon. The guidance on section 10 in CG25500+ for individuals can be applied to trustees.

Charges on the settlor and beneficiaries

To avoid the obvious avoidance opportunities created by not charging the trustees any chargeable gains that accrue to them are treated as accruing to:

  • The settlor under TCGA92/S86 if the settlor has an interest in the settlement and is resident in the UK. These gains are charged in the year they accrue to the trustees.
  • The beneficiaries under TCGA/S87 if the beneficiaries receive capital payments from the trustees that are matched to the trustees’ gains. These gains accrue in the year of matching which can be many years after the gain accrued to the trustees.

Other charges

Other charges that may apply in respect of a non-resident settlement are:

  • An exit charge under TCGA92/S80 if a UK resident settlement becomes non-resident. The charge is payable by the UK resident trustees. This is in addition to any gains that accrue on other disposals during the tax year. See CG38200.
  • A charge on the disposal of an interest in the settlement. The relief given by TCGA92/S76 to the disposal of an interest in a settlement, CG38000, does not apply to non-resident settlements.
  • A charge under TCGA92/Sch 4B or Sch4C if the trustees make a transfer to another trust financed by borrowing, a form of avoidance known as a flip-flop. See CG39100+.