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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Remittance basis and section 87 gains: conferring a benefit - example

B is a UK resident but non-UK domiciled beneficiary of a non-UK resident settlement. B claims the remittance basis. The settlement owns 100% of the issued share capital of a Gibraltarian holding company which in turn owns 100% of the issued share capital of a Gibraltarian company. That company owns a property in Spain. Both companies are non-UK resident.

The company sells the property in Spain creating a section 2(2) amount of £120,000 through TCGA92/S13. The company invests some of the proceeds in the purchase of a smaller property in Spain. B is allowed to use the property rent-free. B is also allowed rent-free use of a cottage in Devon owned by the settlement.

The use of both properties by B gives rise to a capital payment equal to the value of the benefit. These capital payments are matched against the section 2(2) amount and a section 87 chargeable gain accrues to B. Section 87B(2) TCGA provides this is a foreign chargeable gain. The use of the property in Devon meets condition A in section 809L. Because section 87B(3) TCGA provides the benefits derive from the chargeable gains the use of that property also meets condition B in section 809L(3)(b) ITA 2007. B is treated as remitting the capital payment created by the use of the Devon property to the UK and is liable to Capital Gains Tax on that payment. The use of the property in Spain is not treated as a remittance to the UK and B is not liable to Capital Gains Tax on that payment.