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HMRC internal manual

Capital Gains Manual

Matching: non-UK domiciled beneficiary - capital payments received 12 March to 5 April 2008


FA08/Sch07/para125 is an anti-avoidance measure. Its purpose was to discourage trustees making large capital payments to non-UK domiciled beneficiaries immediately before the beginning of 2008-09. These would then be matched against section 2(2) amounts for 2008-09 or later and, unless they had become UK domiciled, the beneficiaries would not be liable to Capital Gains Tax on any gains accruing to them.

The paragraph provides that any capital payment received on or after 12 March and before 6 April 2008 is ignored if it was received by:

  • a UK resident but non-domiciled beneficiary, and
  • the payment is matched against a 2008-09 or later section 2(2) amount, and
  • the beneficiary is still non-domiciled when the gain accrues.

For example, a UK resident but non-domiciled beneficiary receives a capital payment of £500,000 on 4 April 2008. The trust has no section 2(2) amount for 2007-08 and there are no unmatched trustees’ gains for any earlier year. In 2008-09 the trustees accrue a gain of £2 million.

Under the ordinary rules a capital gain of £500,000 would accrue to the beneficiary in 2008-09 and the 2008-09 section 2(2) amount would be reduced to £1.5 million. But because the beneficiary is not domiciled in the UK they would not be liable to capital gains tax on the chargeable gain, CG38765.

The effect of FA08/Sch07/para125 is that the 4 April 2008 capital payment is ignored. The 2008-09 section 2(2) amount of £2 million remains available for matching against capital payments received in later years.