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HMRC internal manual

Capital Gains Manual

Years before 2008-09 - unmatched trustees’ gains - example


The section 2(2) amounts for a settlement are:-

2005-06 £50,000
2006-07 £75,000
2007-08 £60,000

Up to and including 2007-08 capital payments of £90,000 have been received. This is more than the £185,000 trustees’ gains so all the capital payments will have been matched and the “total deemed gains” are £90,000. If it wasn’t for the FA 2008 changes the trustees would have a pool of £95,000 gains at the beginning of 2008-09.

The total deemed gains are matched against the trustees’ gains for the different years taking the earliest year first.

  Original s2 (2) amount Total deemed gains Deemed s2(2) amount
2005-06 £50,000 £50,000 Nil
2006-07 £75,000 £40,000 £35,000
2007-08 £60,000 Nil £60,000

Capital payments received in 2008-09 or later years are allocated using the usual last in first out basis in TCGA92/S87A.

For example, the trustees made no gains or capital payments in 2008-09 but made capital payments of £15,000 each to beneficiaries A and B in 2009-10. These are matched against the section 2(2) amount for 2007-08. The section 2(2) amount for that year is reduced to £30,000. In 2009-10 both beneficiaries are UK resident but beneficiary B is not UK domiciled. Only beneficiary A is liable to Capital Gains Tax on the section 87 gain, FA08/Sch07/para124(2)(b). If B was not domiciled in 2007-08 but was domiciled in 2009-10 the relief provided by FA08/Sch07/para124(2)(b) would not apply and the beneficiary would be liable to Capital Gains Tax on the section 87 gain.