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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Trustees’ gains - section 2(2) amount


The trustees’ gains for a year are called their section 2(2) amount. TCGA92/S87(4) defines the section 2(2) amount as:

  • the amount on which the trustees would be chargeable to tax under section 2(2) if they were UK resident less
  • any amount of those gains charged on the settlor under TCGA92/S86.

In practice if section 86 applies it is likely to apply to all the trustees’ gains unless there is more than one settlor and one or more of the settlors are not liable under section 86.

Annual exempt amount

The trustees do not have an annual exempt amount which is deducted in calculating the section 2(2) amount.


Losses are set against gains and, to the extent they are not used, are carried forward and set against the gains of later years. This is subject to the minor exception in some holdover cases described below. Losses are not attributed to beneficiaries. The usual rule in TCGA92/S16(3) that a loss accruing to a non-resident is not an allowable loss is disapplied by TCGA92/S97(6).

Losses and holdover relief

TCGA92/S79A prevents the sale of trust losses by preventing trust losses being set against trust gains if:

  • the gains accrue on the disposal of assets that were transferred into the trust under a holdover relief claim, and
  • the transferor acquired an interest in the trust, and
  • the transferor gave or will give consideration for their acquisition.


The usual reliefs from Capital Gains Tax may be given subject to the conditions for those reliefs. If the conditions for relief change before the trustees make a matched capital payment the gain is not recalculated using the new rules. This is particularly relevant to taper relief.

Taper relief was given in calculating the trustees’ gains and not when the gain accrued to a beneficiary who received a capital payment. See section 87(6A) before it was substituted in FA 2008. Taper relief was withdrawn for disposals on or after 6 April 2008. Any trustees’ gains for 2008-09 or earlier which were not matched until 2008-09 or later are not recalculated withdrawing the taper.

Two reliefs that may apply are principal private residence relief under TCGA92/S225, CG65400, and the tax-free uplift to market value under TCGA92/S72 on the death of a life-tenant, CG36450.

Double taxation relief

Foreign tax paid by the trustees may be deductible in calculating the trustees’ section 2(2) amount, TIOPA10/S113. See CG38790 for more details about double taxation relief.