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HMRC internal manual

Capital Gains Manual

Double taxation relief - TCGA92/S86

Articles in double taxation agreements which give sole taxing rights to the alienator’s country of residence do not apply to the gain chargeable on the settlor under TCGA92/S86. That is because the person making the disposal is the trustees and not the settlor. Section 86 does not deem the trustees’ gain to accrue to the settlor. Instead section 86(4) treats the settlor as accruing a gain equal to the gain that accrues to the trustees.

This is a particular issue if the country of residence does not tax capital gains, for example, Mauritius or New Zealand. Some Double Taxation agreements, including Mauritius and New Zealand, have been amended to make it clear that the UK has the right to charge attributed gains.

Credit relief may be given for any foreign tax paid on the gains. This is because the gain chargeable on the settlor is calculated by reference to the gain that accrues to the trustees. Foreign tax credit is allowed either under the credit Article in a double taxation article by TIOPA10/S18(1) or unilaterally by TIOPA10/S9(2). See INTM169020 for periods before TIOPA10 came into force on 1 April 2010.