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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Years before 2008-09 - unmatched capital payments - example 2

FA08/Sch07/para122(3)

2005-06 Capital payments received Beneficiary A £16,000
       
  Trustees’ gains (section 2(2) amount)   £2,500
2007-08 Capital payments received Beneficiary A £10,000
    Beneficiary B £8,000
  Trustees’ gains (section 2(2) amount)   £13,000
2008-09 Section 2(2) amount   £20,000

In 2005-06 the trustees’ gains were £2,500. A section 87 gain of £2,500 accrued to beneficiary A. A’s unmatched capital payments were reduced to £13,500.

In 2007-08 A received a further capital payment of £10,000. A’s total unmatched capital payments were £23,500. B received a capital payment of £8,000. The trustees’ gains were £13,000. A section 87 gains of £9,698 accrued to A (£13,000 x £23,500/£31,500). A section 87 gain of £3,302 accrued to B (£13,000 x £8,000/£31,500). A’s unmatched capital payments were reduced to £13,802 (£23,500 - £9,698). B’s unmatched capital payments were reduced to £4,698 (£8,000 - £3,302).

The conditions for FA08/Sch07/para122(3) are satisfied:

  1. Chargeable gains accrued in 2007-08.
  2. Capital payments from 2005-06 and 2007-08 are used for the purposes of determining those gains. The capital payment received by A in 2005-06 affects the 2007-08 section 87 gain accruing to both A and B.
  3. The amount of the chargeable gains £13,000 is less than the total of the capital payments £34,000 used to determine the gain.

Paragraph 122(3) matches the 2007-08 gains first against the unmatched capital payments received in 2005-06. In 2005-06 A’s unmatched capital payments were £13,500. The 2007-08 gains of £13,000 are matched first against those payments reducing the unmatched capital payments to £500. A’s total unmatched capital payments in 2007-08 are allocated £13,302 from 2007-08 and £500 from 2005-06.