CGT on non-resident trusts

By Tolley
CGT on non-resident trusts

The following Trusts and Inheritance Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • CGT on non-resident trusts
  • Non-residents’ liability for CGT
  • Application of the non-residents’ rule to trusts
  • Assets on which non-residents are charged to CGT
  • Rates of tax and the annual exemption
  • Losses
  • Interaction with other CGT provisions
  • Calculation of the charge
  • Compliance

Non-residents’ liability for CGT

With effect from 6 April 2019, a person who is not UK resident for a tax year is chargeable to capital gains tax on gains accruing within the year on disposals of assets which are:

  • situated in the UK and used in the trust’s UK branch or agency (ie for the purposes of a trade, profession or vocation in the UK)
  • interests in UK land, or
  • assets which derive at least 75% of their value from UK land (eg company shares) and the trust has a ‘substantial indirect interest’ in the land. This might be, for example, a 25% investment in a company holding UK land

TCGA 1992, s 1A(3) (from 6 April 2019); TCGA 1992, ss 10, 14B (up to 5 April 2019)

The default position is that CGT is charged only on UK residents on the disposal of chargeable assets. The charge on non-residents trading through a UK branch or agency is a long-standing exception to the general rule.

A charge on non-residents’ gains on residential property was introduced with effect from 6 April 2015. This application of the tax to interests in land was broadened considerably by FA 2019 to include interests in all UK land, both residential and commercial. In addition, the extension covered significant holdings in ‘property-rich’ companies.

Definitions of the assets now subject to the charge on non-residents are described in more detail below.

Application of the non-residents’ rule to trusts

The territorial scope of CGT applies to all ‘persons’, a term which includes individuals, companies, trusts and personal representatives. The residence of a trust is determined by the residence of its trustees who are treated as a single person. See the UK tax position of non-resident trusts guidance note.

Therefore, a trust which meets the conditions of

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