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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Matching: non-UK domiciled beneficiary - unmatched capital payment for year before 2008 - 09 - example


2005 -06 Capital payments received £10,000
2008-09 Capital payments received £16,000
  Section 2(2) amount £24,000

Section 87 gains

The 2008-09 section 2(2) amount is matched on the usual LIFO basis. So the £24,000 is matched first against the 2008-09 capital payment leaving a balance of £8,000 to be matched against the 2005-06 capital payment. The 2005-06 capital payment is reduced to £2,000 (£10,000 - £8,000) and the 2008-09 section 2(2) amount is reduced to nil.

If the beneficiary was non-domiciled in 2008-09 they would be charged to Capital Gains Tax only on the £16,000 matched to the 2008-09 capital payment. The fact that no tax is charged doesn’t prevent the matching and the reduction in the 2005-06 section 2(2) amount and capital payment.