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HMRC internal manual

Capital Gains Manual

TCGA92/S90 - part of settled property transferred for nil consideration - example

No capital payments have been made out of the transferor settlement. The transferor settlement has the following gains made by the trustees:

2005-06 Trustees’ gains (section 2(2) amount) £20,000
2012-13 Section 2(2) amount on transfer of shares £75,000

It is only the ‘relevant proportion’ of these unmatched section 2(2) amounts that is transferred to the transferee settlement. The relevant proportion is 4/5 (£400,000 / [£400,000 + £100,000]).

Transferee settlement

The transferee settlement acquires the following unmatched section 2(2) amounts:

2005-06 £16,000 (£20,000 x 4/5)
2012-13 £60,000 (£75,000 x 4/5)

They are added to any unmatched section 2(2) amounts it already has and can be matched with capital payments made from the transferee settlement in 2012-13 or a later year. This applies whatever the residence status of the transferee settlement.

Transferor settlement

The unmatched section 2(2) amounts of the transferor settlement are reduced by the section 2(2) amounts that have been treated as transferred to the transferee settlement. The unmatched section 2(2) amounts become:

2005-06 £4,000 (£20,000 - £16,000)
2012-13 £15,000 (£75,000 - £60,000)

This reduction has effect for matching in the year after the year of transfer (2013-14) and subsequent years.