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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Non-UK domiciled beneficiary: revaluation to 6 April 2008 - election under paragraph 126 of Schedule 7 FA 2008

FA08/Sch7/para126 is another measure which prevents non-UK domiciled beneficiaries being taxed on gains which relate to the period before 6 April 2008. FA08/Sch7/para124 applies if the trustees’ gains were realised before 6 April 2008. See CG38760. FA08/Sch7/para126 applies if the trustees’ gains were unrealised as at 6 April 2008 and accrued after that date when the asset was disposed of.

FA08/Sch7/para126 restricts the section 87 gain charged on a non-UK domiciled beneficiary to the amount of any growth in the value of the assets from 6 April 2008.

FA08/Sch7/para126(1) requires the trustees to make an election for the paragraph to apply. It must be made by all the trustees or by a majority of them if they are permitted to act through a majority. The election cannot be made by a beneficiary.

An election is irrevocable and applies to all the assets whose disposal creates a section 2(2) amount, FA08/Sch7para/126(5). It cannot increase the tax payable by a beneficiary. Whether or not it improves the position of the beneficiary depends on the history of the assets disposed of. It is not possible to make the election only in respect of assets which have increased in value since 6 April 2008.

The relief is given only to individuals, FA08/Sch7para/126(7)(b).

The election is commonly known as a “rebasing” election but it is not rebasing as that term applies to assets held at 31 March 1982, TCGA92/S35. There is no across the board revaluation of the assets in the trust fund as at 6 April 2008.

The election has no effect on the matching of capital payments to section 2(2) amounts or the reduction of capital payments and section 2(2) amounts. It has no effect on gains accruing to UK domiciled beneficiaries.