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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Transfer of settled property before 6 April 2008 - calculation of section 2(2) amounts

TCGA92/Sch7para121

In detail the steps in TCGA92/Sch7para121 are:

  • Step 1 for the transferor settlement match the total deemed gains against the section 2(2) amounts up to and including the year of transfer using the usual first in - first out (FIFO) rules in paragraph 120.
  • Step 2 for the transferee settlement match the total deemed gains against the section 2(2) amounts for the years up to the year of transfer using the usual FIFO rules in paragraph 120.
  • Step 3 for the transferee settlement calculate the section 2(2) amount for the year of transfer.
  • Steps 4 and 5 calculate the effects of the section 90 transfer on the section 2(2) amounts for both settlements for the years up to and including the year of transfer.
  • Steps 6 and 7 apply the ordinary matching rules in paragraph 120 for all years before 2008-09 but take the section 2(2) amounts as the amounts after the section 90 adjustment and reduce the total deemed gains by any gains already matched. In practice if any amount of the deemed total gains remains unmatched there will be no unmatched section 2(2) amounts for the earlier years.

See CG38975 for guidance on the transferee settlement and CG38980 for guidance on the transferor settlement. The example in CG38985 illustrates both aspects of the calculation.