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HMRC internal manual

Capital Gains Manual

Transfers between settlements: impact on section 2(2) amounts of transferee settlement

The guidance in CG38920 refers to the section 2(2) amount transferred being added to any section 2(2) amounts of the transferee settlement. In practice transfers are often made to new settlements so there are no existing section 2(2) amounts that could be increased and the transfer creates section 2(2) amounts for the earlier years.

If the transfer is to an existing settlement which already has unmatched section 2(2) amounts the increase takes effect only for the year of transfer and subsequent tax years, TCGA92/S90(7). This means:

  • capital payments for earlier years that have already been matched don’t have to be re-matched against the adjusted section 2(2) amounts in the transferee settlement
  • capital payments for earlier years that are unmatched cannot be matched against the adjusted section 2(2) amounts in the transferee settlement, CG38955
  • capital payments for the year of transfer can be matched with the section 2(2) amount of the transferee settlement for the year of transfer.

If the transferee settlement has always been UK resident TCGA92/S90(6) applies the rules in TCGA92/S89. Section 89 deals with the case in which a non-resident settlement becomes UK resident. See CG38600. Section 90(6) treats the transferee settlement as a non-resident settlement which became UK resident the year after the transfer. This means TCGA92/S89 applies to the transferee settlement and it is treated as having section 2(2) amounts which can be matched with capital payments.