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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
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Settlor - TCGA92/S87

The ordinary definition of settlor in TCGA92/S68A applies for section 87. See CG33244 for guidance on section 68A. There are no requirements as to the residence or domicile of the settlor.

When section 87 was introduced in 1981 it applied only to tax years in which the settlor was UK resident and domiciled. This condition was dropped with effect from 17 March 1998. If the settlement was created before that date there is some measure of relief if the trustees’ gains or the capital payments were made before 17 March 1998. Section 87 will apply only in years in which the settlor is UK resident and domiciled, FA08/Sch7para118. Given the passage of time this will be of little practical effect.

If the settlement was created before 17 March 1998 and the gains or capital payments were made after that date there is no relief.

Example

Mr A is neither UK resident nor domiciled. In 1978 he made the A family settlement. The A family settlement has always been non-UK resident. The trustees accrue chargeable gains of £250,000 in 1996-97 and £300,000 in 2002-03. The trustees make no capital payments until 2013-14 when they make a capital payment of £500,000. Only the £300,000 gains which accrued in 2002-03 are attributable to the beneficiaries.