Offshore trusts—matching capital payments—section 87 TCGA 1992
Offshore trusts—matching capital payments—section 87 TCGA 1992

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • Offshore trusts—matching capital payments—section 87 TCGA 1992
  • Matching
  • Anti-avoidance measures from 6 April 2018
  • Position 2008 and prior
  • Non-UK domiciled beneficiaries
  • Charge to tax and supplemental tax
  • Disposals of UK residential property by trustees

Major changes to the taxation of offshore trusts were introduced in 2017 and 2018. These changes are summarised in Practice Note: Changes to the taxation of offshore trusts from 6 April 2017.

The tax implications of making a capital payment from an offshore settlement to a beneficiary (be it an individual or a company) are covered in sections 87–97 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992). The aim of these particular provisions is to prevent UK residents avoiding capital gains tax by structuring investments such that capital gains arise to trustees of a non-resident settlement rather than themselves personally.

Taxation under TCGA 1992, s 87 occurs after all available relevant income (ARI) and offshore income gains (OIGs) in the trust (up to and including the year in which the capital payment is made) have been utilised (ie matched). If there is no ARI or OIGs available for matching then the payment is taxed immediately under TCGA 1992, s 87. ARI and OIGs are discussed in separate practice notes. See Practice Notes: Offshore trusts—available relevant income (ARI) and Offshore trusts—offshore income gains (OIGs).

The effect of TCGA 1992, s 87A is to treat ordinary capital gains that arise to a non-resident settlement as arising to a beneficiary who receives a capital payment. As such, the beneficiary is subject to capital gains tax