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HMRC internal manual

Capital Gains Manual

The charge on the settlor - TCGA92/S86


The trustees’ gains are charged on the settlor in the year in which they accrue to the trustees. This is commonly described as attributing the trustees’ gains. If the trustees make a loss that is not attributed to the settlor but is carried forward to be set against the trustees gains of the following year.

The attributed gains are treated as the top-slice of the settlor’s gains. This is relevant because the settlor can recover any section 86 tax paid from the trustees, CG38540. If the settlor pays Capital Gains Tax at both 18% and 28% it is necessary to distinguish the tax paid on section 86 gains from tax paid on other gains. This means that the settlor’s annual exempt amount and any personal losses are set first against their other gains. The personal losses are allocated pro-rata if the settlor has attributed gains from more than one settlement and the losses are not sufficient to cover all the gains.


When the rate of Capital Gains Tax changed in 2010-11 for that year all section 86 gains were taxed at 18% whether they accrued before or after 22 June 2010, F(No2)A2010/Sch1/para21.



If the year is a split-year for the settlor any section 86 gain is treated as accruing in the UK part of that year. In effect split-year treatment does not apply to section 86 gains. See RDR3 page 51 for guidance on split-years.

Temporary non-residence

See CG38550 if the settlor is charged under TCGA92/S10A on section 86 gains that accrued during a period of temporary non-residence. Relief is given if any of those gains have also been taxed under section 87 because the trustees have made capital payments to UK resident beneficiaries.