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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Matching: non-UK domiciled beneficiaries - events before 2008-09

FA08/Sch07/para124

A major change introduced by FA 2008 was to extend section 87 so that non-domiciled beneficiaries were charged to Capital Gains Tax on section 87 gains. But the change was not retrospective so it does not apply if one element of the matching event relates to a year before 6 April 2008. A non-domiciled beneficiary is not charged to Capital Gains Tax if:

  • a capital payment received in 2007-08 or earlier is matched against a section 2(2) amount accruing in 2008-09 or later, CG38765
  • a section 2(2) amount accruing in 2007-08 or earlier is matched against a capital payment received in 2008-09 or later, CG38770.

There is no requirement that the beneficiary is a remittance basis user. This rule applies only if the beneficiary is non-domiciled in the year the chargeable gain accrues; FA08/Sch07/para124(1)(b). In practice it would be very unusual for a UK resident beneficiary who was UK domiciled before 6 April 2008 to become non-domiciled after 6 April 2008. The practical effect of the rule is to deny relief to a UK resident beneficiary who becomes UK domiciled in between the two events that make up the matching process.

It is possible that a chargeable gain accruing in 2008-09 or later may be made up of section 2(2) amounts or capital payments some of which relate to years before 2008-09 and some to 2008-09 and later. In these cases a non-domiciled beneficiary may be liable to Capital Gains Tax on part only of the gains.

FA08/Sch07/para126

Another form of relief for non-domiciled beneficiaries is for the trustees to make an election under FA08/Sch07/para126. This applies if the trustees’ gains were unrealised as at 5 April 2008. The election restricts the section 87 tax payable to the gain on any growth in value of the trust assets since 6 April 2008, CG38840.