CG38740 - Years before 2008-09 - unmatched trustees’ gains - example

FA08/Sch07/para120

The section 2(2) amounts for a settlement are:-

Year Amount
2005-06 £50,000
2006-07 £75,000
2007-08 £60,000

Up to and including 2007-08 capital payments of £90,000 have been received. This is more than the £185,000 trustees’ gains so all the capital payments will have been matched and the “total deemed gains” are £90,000. If it wasn’t for the FA 2008 changes the trustees would have a pool of £95,000 gains at the beginning of 2008-09.

The total deemed gains are matched against the trustees’ gains for the different years taking the earliest year first.

Year Original s2 (2) amount Total deemed gains Deemed s2(2) amount
2005-06 £50,000 £50,000 Nil
2006-07 £75,000 £40,000 £35,000
2007-08 £60,000 Nil £60,000

Capital payments received in 2008-09 or later years are allocated using the usual last in first out basis in TCGA92/S87A.

For example, the trustees made no gains or capital payments in 2008-09 but made capital payments of £15,000 each to beneficiaries A and B in 2009-10. These are matched against the section 2(2) amount for 2007-08. The section 2(2) amount for that year is reduced to £30,000. In 2009-10 both beneficiaries are UK resident but beneficiary B is not UK domiciled. Only beneficiary A is liable to Capital Gains Tax on the section 87 gain, FA08/Sch07/para124(2)(b). If B was not domiciled in 2007-08 but was domiciled in 2009-10 the relief provided by FA08/Sch07/para124(2)(b) would not apply and the beneficiary would be liable to Capital Gains Tax on the section 87 gain.