CG38925 - Transfers between settlements: impact on section 2(2)* amounts of transferee settlement

The guidance in CG38920 refers to the section 2(2)* amount transferred being added to any section 2(2)* amounts of the transferee settlement. In practice transfers are often made to new settlements so there are no existing section 2(2)* amounts that could be increased and the transfer creates section 2(2)* amounts for the earlier years.

If the transfer is to an existing settlement which already has unmatched section 2(2)* amounts the increase takes effect only for the year of transfer and subsequent tax years, TCGA92/S90(7). This means:

• capital payments for earlier years that have already been matched don’t have to be re-matched against the adjusted section 2(2)* amounts in the transferee settlement
• capital payments for earlier years that are unmatched cannot be matched against the adjusted section 2(2)* amounts in the transferee settlement, CG38955
• capital payments for the year of transfer can be matched with the section 2(2)* amount of the transferee settlement for the year of transfer.

If the transferee settlement has always been UK resident TCGA92/S90(6) applies the rules in TCGA92/S89. Section 89 deals with the case in which a non-resident settlement becomes UK resident. See CG38600. Section 90(6) treats the transferee settlement as a non-resident settlement which became UK resident the year after the transfer. This means TCGA92/S89 applies to the transferee settlement and it is treated as having section 2(2)* amounts which can be matched with capital payments.

*This section was re-written for disposals from 6 April 2019 to section 1(3) see CG10150.