Taxation of Chargeable Gains Act 1992 section 87K

Attribution of gains or payments to recipient of onward gift

Section 87K determines how trust gains and capital payments are redirected from the original recipient of a capital payment to the person who actually receives an onward gift derived from that payment, ensuring the tax charge falls on the ultimate UK-resident recipient.

• Where an onward gift is made from a capital payment received from an offshore trust, the tax rules treat the subsequent recipient — not the original recipient — as having received a capital payment from the trustees, up to the value of the onward gift
• If the value of the onward gift exceeds the unmatched portion of the original payment, any remaining untaxed matched gains are treated as chargeable gains accruing directly to the subsequent recipient in the year they received the gift
• The original recipient's tax position is correspondingly reduced: the capital payment attributed to them is decreased by the amount redirected, and any chargeable gains already attributed to them are reduced by the gains now taxed on the subsequent recipient
• Where multiple onward gifts are made from the same original payment in different tax years, the amounts available for attribution to later recipients are reduced by amounts already attributed in respect of earlier gifts

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