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HMRC internal manual

Capital Gains Manual

Transfers between settlements - introduction

TCGA92/S90 and 90A

Trustees may re-settle, appoint or otherwise transfer assets to another trust. See CG37800+. A transfer of assets is a capital payment. See TCGA92/S97(1) and CG38625. But transfers to other settlements are excluded from the very wide rule in TCGA92/S97(8) that any person who receives a capital payment is treated as a beneficiary of the settlement. See TCGA92/S97(10) and CG38605. So if the transferor settlement has unmatched chargeable gains there is no TCGA92/S87 charge on a transfer to another trust.

If the transferee settlement has no unmatched chargeable gains that settlement could make capital payments out of the transferred assets without triggering a section 87 gain. That is because the transferee settlement would not itself have any section 2(2) amounts against which the payments could be matched.

TCGA92/S90 deals with this by providing that all or part of the unmatched trust gains are transferred to the transferee settlement.

See CG38670 for comment on avoidance cases which exploited a loophole which prevented TCGA92/S90 from applying. The loophole was closed in 2003.

If the assets transferred include chargeable assets the transfer is itself a disposal and a chargeable gain will accrue to the transferor settlement.