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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Transfers between settlements - calculating the section 2(2) amounts transferred

If TCGA92/S90 applies the first step is to carry out the section TCGA92/S87A matching in the transferor settlement for the year of transfer. See CG38960. Any gain accruing on the transfer itself is included in the section 2(2) amount for the year of transfer and is included in this matching. It is only the unmatched section 2(2) amounts remaining that may be transferred to the transferee settlement, TCGA92/S90(3).

The value of unmatched section 2(2) amounts transferred depends on whether all or only part of the settled property is transferred and what consideration, if any, is given for the transfer.

All the settled property is transferred for nil consideration

All the unmatched section 2(2) amounts of the transferor settlement are added to the section 2(2) amounts of the transferee settlement, TCGA92/S90(3)(a).

The unmatched section 2(2) amounts of the transferor settlement are reduced to nil, TCGA92/S90(5).

See the example in CG38930.

Only part of the settled property is transferred for nil consideration

Only the ‘relevant proportion’ of the unmatched section 2(2) amounts of the transferor settlement is added to the section 2(2) amounts of the transferee settlement, TCGA92/S90(3)(b). The relevant proportion transferred is ‘the market value of the property transferred’ divided by ‘the market value of the property comprised in the transferor settlement immediately before the transfer’, TCGA92/S90(4).

The unmatched section 2(2) amounts of the transferor settlement are reduced by the same amount, TCGA92/S90(5).

See the example in CG38935.

All or part of the settled property is transferred for a consideration equal to or greater than market value

No unmatched section 2(2) amounts of the transferor settlement are added to the section 2(2) amounts of the transferee settlement. The unmatched section 2(2) amounts of the transferor settlement remain in the transferor settlement, TCGA92/S90A(1).

See the example in CG38940.

All the settled property is transferred for a consideration less than market value

Only the ‘relevant proportion’ of the unmatched section 2(2) amounts of the transferor settlement are added to the section 2(2) amounts of the transferee settlement. But the relevant proportion formula in TCGA92/S90(4) is modified by reducing the market value of the property transferred by the amount of the consideration, TCGA92/S90A(2) and (4). Because the relevant proportion formula does not apply if all the trust property is transferred TCGA92/S90A(3) treats the transfer as if it were a transfer of part of the property.

The unmatched section 2(2) amounts of the transferor settlement are reduced by the same amount, TCGA92/S90(5).

See the example in CG38945.

Only part of the settled property is transferred for consideration less than its market value

Only the ‘relevant proportion’ of the unmatched section 2(2) amounts of the transferor settlement are added to the section 2(2) amounts of the transferee settlement. But the relevant proportion formula in TCGA92/S90(4) is modified by reducing the market value of the property transferred and the market value of the trust property before the transfer by the amount of the consideration, TCGA92/S90A(2) and (4).

The unmatched section 2(2) amounts of the transferor settlement are reduced by the same amount, TCGA92/S90(5).

See example in CG38950.

For any of these calculations, where property is subject to a debt, the market value of the property should be reduced by the amount of the debt TCGA92/S90(9).

The reduction in the unmatched section 2(2) amounts of the transferor settlement has effect for the year after the year of transfer, TCGA92/S90(8). This is to allow the trustees’ section 2(2) amount for the year of transfer to be matched before TCGA92/S90 applies.