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HMRC internal manual

Capital Gains Manual

Calculation of trustees’ gains - TCGA92/S86


The gains chargeable under section 86 are the gains that would have accrued to the trustees’ if they had been resident in the UK, section 86(1)(e). There is no requirement that the assets are located outside the UK. Often they are not, for example, the trust property could be land in the UK or shares in a UK company.

Annual exempt amount and losses

The trustees are not entitled to any annual exempt amount. Losses can be set against gains and are carried forward to the extent that they are not used. The only restriction is that losses cannot be carried forward from a year in which the conditions for section 86 to apply are not met, TCGA92/Sch5/para1(6). Neither are losses that accrued before 19 March 1991 carried forward.

Underlying section 13 company


If the trustees are participators in a non-resident company that would be a close company if it were UK resident any gains made by that company may be caught by TCGA92/S13, see CG57200. Section 13 was subject to extensive amendment from 6 April 2012 and the number of cases within section 13 is likely to be much reduced. If there is a section 13 gain it is included in the trustees’ gains if it accrues “in respect of property which originates from the settlor”. Property will originate from the settlor if the settlor has settled shares in the company into the settlement or has settled funds that the trustees have used to acquire the shares.

Treaty protected assets


The trustees’ gains may be restricted if section 86 applies because UK resident trustees are also treaty non-resident, see CG38450. Only the gains on treaty protected assets are chargeable unless the total gains are lower. This will happen only if there is a loss on the non-treaty protected assets.

Treaty protected assets are assets on which any gain is not chargeable to UK tax because of a double taxation agreement. If there is no gain on the treaty protected assets no amount is chargeable under section 86. If the gains on treaty protected assets are £25,000 and the total gains are £18,000, because there is a loss of £7,000 on the non-treaty protected assets, only £18,000 is chargeable under section 86.