The Gazette 1983

GAZETTE

APRIL 1983

beneficiary, are regarded as trust gains for the year.

The "trust gains for the year" are then treated as

chargeable gains accruing to any beneficiary of the settle-

ment who actually received a capital payment from the

trustees in that year, or received a capital payment from the

trustees in earlier years in respect of which no trust gains

were attributed. The chargeable gain is then attributed in

proportion to the capital payment received by the

beneficiary but the gain so attributed is not to exceed the

payment received.

For example, under a non-resident settlement made in

1982, the trustees make gains of £ 1 0 , 0 00 in the year '83/'84

and then, in the following year, make capital distributions

to two U . K. resident beneficiaries of £ 2 0 , 0 00 to

beneficiary A and £ 6 0 , 0 00 to beneficiary B. The gains will

be apportioned as to one-quarter to beneficiary A (£2,500)

and three-quarters to beneficiary B (£7,500).

Note that a beneficiary is not chargeable to U . K. Capital

Gains Tax unless he is domiciled in the U . K. at s ome t ime

in the year in which he receives the benefit.

These rules apply to will trusts as well as settlements,

but it should be borne in mind that if the settlor was not

domiciled in the U . K. when he made the settlement or at

the time the gains were made, then the old rules still apply

— that the total gains of the non-resident trust may be

apportioned annually between U . K. resident beneficiaries

who are

likely

to benefit from the settlement. For example,

if the beneficiaries of a n o n - U . K. resident discretionary

settlement are the children and grandchildren of the settlor

and under a letter of wishes the settlor has indicated to the

trustees that he wishes the trust fund ultimately

distributed to his grandchildren, then, if this letter of

wishes is disclosed to the U . K. Revenue, they will

apportion the gains between the grandchildren in equal

shares; if it is not disclosed, then they are likely to

apportion the gains of the settlement between

all

the

resident beneficiaries each year.

There are a large number of Irish-resident donors and

trusts with potential beneficiaries resident in various parts

of the United

Kingdom. The

Doub le

Taxation

Agreements at present in force do not appear to cater for

the problems arising. The Taxation Committee of the

Law Society is considering the problem with a view to

making representations in appropriate quarters to see if

inequities can be removed.

U . K. tax is a complex and specialised subject and, quite

apart from the questions of Capital Gains, there may be

Capital Transfer Tax and other implications to be borne in

mind. Irish professional advisers would be well advised

to seek assistance from suitably qualified U . K. colleagues

before taking decisions and making distributions to benefi-

ciaries resident in the U . K. •

Addendum

Since this article was written, the U . K. General Election

necessitated the deletion of a number of sections from the

U . K. Finance Bill 1983, including sections confirming:—

(i) That in most cases the acquisition cost of trust-assets

to which a beneficiary becomes absolutely entitled as

against non-resident trustees is restricted to the

consideration, if any, given by such beneficiary;

(ii) The liability in certain circumstances of U . K. resident

beneficiaries for capital gains tax on gains made by

non - r e s i d e nt trustees with the d e f i n i t i ons of

'settlement' and 'settlor' broadened.

Presumably, the new government will incorporate

similar provisions in the next U . K. Finance Bill.

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