Section 86 — Taxation of Chargeable Gains Act 1992: Attribution of gains to settlors with interest in non-resident or dual resident settlements.

Attribution of gains to settlors with interest in non-resident or dual resident settlements. 86 1 This section applies where the following conditions are fulfilled as regards a settlement in a particular year of assessment—

a the settlement is a qualifying settlement in the year;

b the trustees of the settlement fulfil the condition as to residence specified in subsection (2) below;

c a person who is a settlor in relation to the settlement (“ the settlor ”) ... is resident in the United Kingdom for the year ;

d at any time during the year the settlor has an interest in the settlement;

e by virtue of disposals of any of the settled property originating from the settlor, there is an amount on which the trustees would be chargeable to tax for the year under section 1(3) if the assumption as to residence specified in subsection (3) below were made;

f paragraph 3, 4 or 5 of Schedule 5 does not prevent this section applying.

2 The condition as to residence is that—

a there is no time in the year when the trustees are resident in the United Kingdom, or b there is such a time but, whenever the trustees are resident in the United Kingdom during the year, they fall to be regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom.

3 Where subsection (2)(a) above applies, the assumption as to residence is that the trustees are resident ... in the United Kingdom throughout the year; and where subsection (2)(b) above applies, the assumption as to residence is that the double taxation relief arrangements do not apply. 3A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 Where this section applies—

a chargeable gains of an amount equal to that referred to in subsection (1)(e) above shall be treated as accruing to the settlor in the year or if, as respects the settlor, the year is a split year, in the UK part of that year , ... b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4ZA Where (apart from this subsection) the amount mentioned in subsection (1)(e) would include a chargeable gain or allowable loss to which section 1A(3)(b) or (c) applies (disposals by non-UK residents within the charge to capital gains tax), so much of the gain or loss as would be so included is to be disregarded for the purposes of subsection (1)(e). 4ZB Where (apart from this subsection) the amount mentioned in subsection (1)(e) would include an amount of chargeable gains accruing by virtue of the trustee’s entitlement to a sum of carried interest, the amount of the gains is to be disregarded for the purposes of subsection (1)(e). 4ZC In subsection (4ZB)—

a “ carried interest ” has the same meaning as in section 23I of ITTOIA 2005 (see Part 1 of Schedule A1 to that Act),

and b that definition has effect as if references to a sum arising to an individual included a reference to a sum arising to the trustees. 4A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 Schedule 5 (which contains provisions supplementary to this section) shall have effect.

6 See also paragraph 3 of Schedule D1 (foreign gain claims: foreign gains and losses of the trustees ignored for the purposes of subsection (1)(e)).