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HMRC internal manual

Capital Gains Manual

TCGA92/Sch4C - outline

TCGA92/Sch4C replaces TCGA92/S87 as a means of matching capital payments to trustee gains if the trustees have made a transfer of value to which Schedule 4B applies. It is wholly complementary to Schedule 4B and will not apply unless that Schedule also applies. Because TCGA92/Sch4B applies only to non-resident settlements TCGA92/Sch4C applies only to non-resident settlements or settlements that were non-resident, CG39110.

The mechanics are very similar to, and based on, TCGA92/S87. The guidance on TCGA92/Sch4C assumes that you are familiar with TCGA92/S87, CG38570+.

If the trustees make a transfer of value to which Schedule 4B applies they are treated as having a Schedule 4C pool which comprises:

  • any Schedule 4B gain
  • any section 2(2) amounts that are unmatched for years up to and including the year of transfer.

Capital payments received from the trustees of either the transferor or transferee settlement are matched against the Schedule 4C pool. In general the TCGA/S87A rules apply. One exception is that the gains are matched only if the beneficiary is chargeable to UK tax on the gain. If the beneficiary is not UK resident the gain remains in the Schedule 4C pool.

The year after the transfer any trustee gains for either settlement create the usual section 2(2) amounts and TCGA/S87 applies. Any capital payments received in that or any later year are matched first against the Schedule 4C pool until that pool is exhausted.

If the trustees make a further transfer of value linked with trustee borrowing in a later year the treatment depends on whether there are any unmatched gains left in the original Schedule 4C pool:

  • unmatched gains - the new Schedule 4B gain is added to the existing Schedule 4C pool
  • no unmatched gains - start a new Schedule 4C pool.

There are rules similar to TCGA92/S91 to increase the rate of tax payable if there is a gap of more than one year between the creation of the Schedule 4C pool and the receipt of the capital payment.