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HMRC internal manual

Capital Gains Manual

Remittance basis - when are section 87 gains remitted to the UK?

TCGA92/S12(5) and TCGA92/S87B

TCGA92/S12(5) provides that the rules in ITA2007/S809L+ apply to determine when a foreign chargeable gain is remitted to the UK. The rule that will apply to section 87 gains is ITA2007/S809L(1)(a). That requires that the chargeable gain itself or property or benefits derived from the chargeable gain is remitted to the UK. Without some modification it would be difficult to apply that rule to section 87 gains as the gain doesn’t accrue from a disposal with identifiable disposal proceeds.

TCGA92/S87B(3) deals with this by deeming relevant property or benefits to derive from section 87 foreign chargeable gains. Relevant property and benefits are defined in section 87B(4).

Property, which includes money, is relevant if:

  • the property paid or transferred is itself the capital payment which when it is matched produces the section 87 gain. This covers the ordinary case in which the trustees pay cash or transfer an asset to the beneficiary. That is a capital payment which will produce a section 87 gain when it is matched. The gain will be chargeable when it is remitted to the UK. See CG38815.
  • a beneficiary becomes absolutely entitled to the property such that there is a capital payment because TCGA92/S60 applies. Section 60 applies when a beneficiary becomes absolutely entitled as against the trustees. TCGA92/S97(2) deems this to be a capital payment. See CG38635.

A benefit will be relevant if the capital payment consists of the conferring of the benefit. This covers the case in which the capital payment is the value of the use of an asset such as rent-free accommodation or an interest free loan. For these gains to be remitted the asset has to be situated in the UK.