Attribution of settlement gains—overview
The capital gains of a non-resident settlement are not chargeable on its trustees, unless they arise from the disposal of a UK branch or agency or an interest in UK land1.
They may, however, be chargeable on the settlor where he has retained an interest in the settlement2 (see I5.1225) or, where this charge does not apply and the payment has not already been liable to income tax under the transfer of assets abroad rules3 (see I5.1236), they may be treated as accruing to a beneficiary.
The beneficiary is deemed to realise a chargeable gain in a tax year if4:
• he has received a 'capital payment' (see I5.1241) from the trustees in that or an earlier year, and
• all or part of that payment is matched with the trustees' gains (see I5.1245), calculated as if the trustees were UK resident5
Whenever trust gains are attributed under these provisions there are rules to determine how the capital payment should be matched with them6.
Originally this provision only applied to tax the settlement gains on the original beneficiary recipient of the capital payment. However, the gains are not attributed to the original beneficiary and are instead taxed on another person broadly where:
• he is non-resident7, unless only temporarily non-resident8 (see I5.1243)
• he is a close family member of a UK resident settlor, in which case the gains may instead be attributable to the settlor9 (see I5.1244)