Commentary

I5.1247 Matching of settlement gains with onward gifts

IHT, trusts and estates

I5.1247 Matching of settlement gains with onward gifts

I5.1247 Matching of settlement gains with onward gifts

Onward payments—overview

From 2018/19, a UK resident recipient of an 'onward payment' in relation to a non-resident settlement is deemed to realise a chargeable gain1 (see I5.1244).

Special identification rules apply to determine how much of the payment is matched with the trustees' gains and subject to a tax charge, and it is these rules that are outlined in this document.

Onward payments—identifying parts of the original capital payment

Slices of the original capital payment

It is necessary establish how the onward payment relates to the original capital payment to determine any amounts which are currently unmatched, or matched and either taxed or untaxed. To do so, the original capital payment is treated as divided into the following 'slices'2:

  1.  

    •     the taxed part (if any) of each matched amount (if any)

  2.  

    •     'U', the untaxed part (if any) of each matched amount (if any), and

  3.  

    •     'R', the remaining unmatched

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