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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Definition of relevant settlement

TCGA92/Sch4C/para8A

Chargeable gains accrue to beneficiaries who receive capital payments from a relevant settlement.

A relevant settlement in relation to the original transfer of value is the transferor settlement and the transferee settlement, TCGA92/Sch4C/para8A(2).

If a relevant settlement makes a transfer of value or TCGA92/S90 transfer, CG38910+, any transferee settlement in relation to that later transfer is also a relevant settlement in relation to the original Schedule 4C pool, TCGA92/Sch4C/para8A(3).

If a relevant settlement makes a transfer of value any settlement that is a relevant settlement in relation to the original Schedule 4C pool is also a relevant settlement in relation to the later Schedule 4C pool, TCGA92/Sch4C/para8A(4).

Wider definition of relevant settlement

The rules in sub-paragraphs 8A(3) and (4) cast the net of TCGA92/Sch4C very wide. The reason for them is to prevent the effect of TCGA92/Sch4C being avoided by the following type of arrangement.

The trustees of settlement 1 have a pool of stockpiled TCGA92/S87 gains. They make a trivial transfer of value to settlement 2. The transfer creates a Schedule 4C pool which includes the stockpiled TCGA92/S87 gains. A Schedule 4C pool is created even if there is no TCGA92/Sch4B gain, CG39260.

The trustees of settlement 1 then make a further transfer of value to settlement 3. This gives the trustees of settlement 1 another Schedule 4C pool but the only gains in it are any TCGA92/Sch4B gains created by the transfer of value, which may be minimal. Without the wider definition of relevant settlement any capital payments by the trustees of settlement 3 would be matched only against the gains in the later Schedule 4C pool and not against the pool which includes the stockpiled section 87 gains.

Residence of relevant settlements

The trustees of a relevant settlement can be resident or non-resident, TCGA92/Sch4C/para10.