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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Transfer of settled property before 6 April 2008: outline


The rules in TCGA92/Sch7para120 used to calculate the trustees’ unmatched section 2(2) amounts for years before 2008-09, see CG38735, have to be adapted if there has been a TCGA92/S90 transfer. This is to prevent the total deemed gains being matched against section 2(2) amounts that have been transferred to another settlement. This is dealt with in TCGA92/Sch7para121 in a series of steps.

These steps preserve the basic approach in paragraph 120. This is to match the TCGA/S87 gains that have accrued before 2008-09 (the total deemed gains) against the trustees’ gains (section 2(2) amounts) on a first in - first out basis. But this is done in two stages.

First you match the deemed gains up to and including the year of transfer. Then you apply the section 90 rules increasing the section 2(2) amounts of the transferee settlement and reducing the section 2(2) amounts of the transferor settlement. This is steps 1 to 5 in CG38970.

Second you carry out the ordinary matching in paragraph 120 for all years up to 2007-08 but do this to the figures as adjusted by steps 1 to 5. For both settlements you will need to calculate the remaining section 2(2) amounts and section 87 gains for the years from the year of transfer to 2007-08. But the total deemed gains for all years are reduced by the amount of any deemed gains already matched and the section 2(2) amounts for the years up to the transfer are the adjusted figures. The usual first in-first out rules apply and total deemed gains should be matched first against the section 2(2) amount of earliest year even if that is before the transfer. This is steps 6 and 7 in CG38970.