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HMRC internal manual

Capital Gains Manual

Temporary non-residence - the solution

TCGA92/S86A deals with this problem by reducing the amount of the section 86 gains charged under section 10A by the amount charged on those gains under section 87. A feature of section 87 is that the trustees’ gains are matched to any beneficiary who receives a capital payment. Whether there is a charge to UK Capital Gains Tax depends on whether the beneficiary is UK resident. Only the amounts charged to tax reduce the section 86 gains.

The basic conditions for section 86A to apply are:

  • gains chargeable under section 86 for a year of absence, year A, are treated by section 10A as accruing to the settlor in the year of return
  • amounts have been charged under section 87 for years before the year of return
  • the amounts taxed under section 87 are in respect of matched capital payments.

A matched capital payment is a capital payment that is matched with the trustees’ gains for year A. The capital payment could have been received in, before or after year A. The purpose of this rule is to match the gains charged under s86 with the trustees’ gains that are taxed under section 87.