CG38723 - Charge on beneficiary of non-resident settlement – TCGA92/S87: Matching in an earlier year - example - the rules for 2008-09 to 2017-18

2013-14

-	-	Amount
Trustees’ section 2(2) amount	-	£10,000
Capital payments	beneficiary A	£65,000

2012-13

-	Amount
Trustees’ section 2(2) amount	£20,000
Capital payments	nil

2011-12

-	Amount
Trustees’ section 2(2) amount	£30,000
Capital payments	nil

Section 87 gains

The capital payment £65,000 is matched first against the 2013-14 £10,000 section 2(2) amount. The unmatched capital payments of £55,000 are available for matching against section 2(2) amounts in earlier years taking the latest year first.

The payments are matched first against the section 2(2) amount of £20,000 in 2012-13 and then against the section 2(2) amount of £30,000 in 2011-12. Total gains of £60,000 accrue to A in 2013-14, £10,000 + £20,000 + £30,000.

A has an unmatched capital payment of £5,000 in 2013-14 available for matching against section 2(2) amounts of later years. See CG38720.

The section 2(2) amounts for all years are reduced to nil.

Because a capital payment received in 2013-14 is matched against a section 2(2) amount for a tax year two years earlier the rate of Capital Gains Tax is increased by 10% on that part of the gain, CG38795. If A is liable to Capital Gains Tax at 28% the rate of tax charged on the £30,000 gain matched against 2011-12 section 2(2) amount is 30.8%.