Dear Members, please can I check this point?
If a foreign trust becomes a UK trust. It has unused stockpiled gains (SPG) from when it was not a UK resident trust. If current year gains which are fully taxed as a UK trust, are not distributed in full, then what is the ordering rule in the following year of these taxed UK gains?
Do they fall behind the SPG and can only be distributed once the SPG is fully distributed?
If you are able to guide me also to the specific guidance on HMRC’s manuals and/or in TCGA92 then that will be great.
I understand that the current year’s taxed gains can be distributed in the current year before the SPG.
Thank you
Once a non-UK resident trust becomes UK resident no further s1(3) (previously s2(2)) amounts can arise.
At the date of importation there may be stockpiled s1(3) amounts (ie unmatched gains).
If, subsequent to importation, the trustees make a disposal a UK CGT charge arises but the gain is not added to the s 1(3) stockpiled amounts.
Any capital distribution thereafter is matched to the stockpiled gains on a LIFO basis.
The gains arising to the trustees following UK residence are immediately taxed and cannot be matched to any capital payments.
Haven’t checked the Manuals.
The key sections are TCGA 1992 s 87 with s 87A (dealing with the matching rules) and s 89 (dealing with the position of UK trust residence post a period of non-residence).
Malcolm Finney
Thank you for the reply Malcolm.
I did take advice separately and it was confirmed that s.87 rules do not apply to current year gains if distributed before the end of the tax year. s.87 would apply to the untaxed stockpiled gains after that at the end of that year.
I have looked through TCGA92 s.87 and s.89 again but it’s not clear to me that the gains arising when the trust is UK resident, if not distributed in the year it arises then what happens to them.
I would really like to see some guidance somewhere. HMRC’s guidance is not helpful on this point.
Thank you for your help with this.
Are you saying that you received advice that if in the first UK tax year of residence following non-UK residence if a gain its made by the UK resident trustees that if a capital distribution is made in that first tax year that s87 is inapplicable? I see no reason why s87 would not apply matching the capital distribution in the first tax year of residence to the stock piled gains.
Malcolm Finney
PS I no longer appear to be able to see one of your posts nor my response??
I think there is confusion, s.87 does apply to the first year and capital payments should be matched to stockpiled gains in the first year, BUT the taxed UK resident gains can also be distributed before the end of the year (in any year for that matter) before capital payments that are not from that taxed gains are matched to stockpiled gains.
I am working with a tax lawyer on this, so I know his advice is good, it’s just that I have not received yet response on what happens if the taxed gains are not fully distributed, so in the meantime, I am searching for answers on the forum too…
Have you had this scenario in practice?
Which post are you referring to? is that the separate one about the DTA and temporary residence?
Many thanks