Commentary

I5.1250 Unmatched capital payments and gains before 2008/09

IHT, trusts and estates

I5.1250 Unmatched capital payments and gains before 2008/09

I5.1250 Unmatched capital payments and gains before 2008/09

Pre-2008/09 rules—overview

Before 6 April 2008, beneficiaries who were not domiciled in the UK did not suffer a CGT charge1 if they received capital payments from a non-resident settlement. They could remit trust gains to the UK completely free of UK tax while the trust gains available for matching would still be reduced by the matched amount.

For 2007/08 and earlier years, capital payments were matched with capital gains on a first in, first out (FIFO) basis, rather than on the current last in, first out (LIFO) basis. To the extent that the gains were so matched, they were treated as chargeable gains of the beneficiaries for that year in proportion to the capital payments made to each of them2. Any unmatched trustees' gains for a year were carried forward and added to any gains for the next year, creating a single pool of gains for the following year3.

Earlier payments were matched with earlier gains, and any unmatched capital payments were carried forward to be matched with future gains4. If part of the pool of gains could not be matched with the capital payments, the excess formed part of the pool of gains for the following year.

If there were unmatched capital gains of a non-resident settlement at 5 April 2008 and the trustees became resident in the UK in 2008/09, those gains can be matched with capital payments in 2008/09 and subsequent years5.

With effect from 6 April 2008, non-domiciled

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