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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Non-UK domiciled beneficiaries - remittance basis

TCGA92/S87B

A non-UK domiciled taxpayer may claim the remittance basis or may be entitled to the remittance basis without making a claim. In that case they will not be charged to Capital Gains Tax on foreign chargeable gains until those gains are remitted to the UK. Foreign chargeable gains are gains which accrue on the disposal of assets outside the UK. See CG25300+.

If a TCGA/S87 gain accrues to a remittance basis user TCGA/S87B provides the section 87 gain is a foreign chargeable gain. This applies even if the gains which make up the trustees’ section 2(2) amount accrue on the disposal of assets situated in the UK.

Treating section 87 gains which accrue to remittance basis users as a foreign chargeable gain allows the remittance basis to apply to those gains. That means the gain is not chargeable until it is remitted to the UK. Also any unremitted section 87 gains are included in the total of the beneficiary’s unremitted foreign income and gains for the purposes of section 809D ITA 2007. See RDRM32135. Section 809D ITA 2007 applies the remittance basis without a claim for any year in which the beneficiary’s unremitted income and gains are below £2000.

Remittance basis applies to beneficiary’s s87 gain not trustees’ section 2(2) amount

The remittance basis applies to the section 87 gain not the gain that created the section 2(2) amount. For example, trustees dispose of an asset held outside the UK creating a section 2(2) amount. In the same year they make a capital payment outside the UK to a non-domiciled beneficiary. The capital payment is matched against the section 2(2) amount. A section 87 gain accrues to the beneficiary who has claimed the remittance basis for that year. The trustees apply the proceeds of the disposal in buying investments in the UK. This remittance of the gain which created the section 2(2) amount is not treated as a remittance of the section 87 gain by the beneficiary.

Annual exempt amount

If the beneficiary claims the remittance basis they will not have an annual exempt amount for that year, TCGA92/S3(1A). If they also make an election under TCGA92/S16ZA to use their foreign losses the annual exempt amount cannot be set against their foreign chargeable gains when those gains are remitted to the UK, TCGA92/S16ZB(3) and (4). This applies even if the taxpayer does not claim the remittance in that later year.

If the beneficiary hasn’t made the election and doesn’t claimed the remittance basis for the year in which the gain is remitted to the UK they will have their annual exempt amount for that year. This can be set against the section 87 gain.

Ordinary residence 2008-09 to 2012-13

For the years 2008-09 to 2012-13 an individual who was UK domiciled but not ordinarily resident in the UK was also entitled to the remittance basis. These individuals have always been liable to pay Capital Gains Tax on section 87 gains. Section 87B(1)(c) preserved this by restricting the application of section 87B to cases in which the individual was not domiciled. FA 2013 repealed most references to ordinary residence so that now only individuals who are not UK domiciled can claim the remittance basis and section 87B(1)(c) has been repealed.