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TCGA92/Sch4C/para8

TCGA92/Sch4C works in a very similar way to TCGA92/S87, CG38570. Chargeable gains accrue to beneficiaries who receive capital payments from the trustees of a relevant settlement. In the straightforward case a relevant settlement is either the transferor or transferee settlement. See CG39295 for guidance on the wider definition of relevant settlement.

Certain capital payments not matched

Only payments received by a beneficiary who is “chargeable to tax for that yearâ€� are matched, TCGA92/Sch4C/para8(3)(b). That term is defined in TCGA92/Sch4C/para1A(3) as a beneficiary who is resident in the UK. A payment to a UK resident charity is matched even though it is not chargeable to UK tax because the charity satisfies the residence condition. »Ê¹ÚÌåÓýapp test for residence is applied in the year the payment is matched; in other words, in the year the gain would accrue. So payments received by a non-resident beneficiary are not matched and remain in the Schedule 4C pool.

Payments received in a tax year before the tax year preceding the tax year in which the original transfer of value was made, TCGA92/Sch4C/para9(2) are not matched.

TCGA92/Sch4C/para9 lists other capital payments that are not matched but they are very unlikely to apply in practice.

Matching rules

TCGA92/Sch4C/para8 applies the rules in TCGA92/S87A for the purposes of matching capital payments to the gains in the Schedule 4C pool, TCGA92/Sch4C/para8(3).

If the trustees have a Schedule 4C pool and section 2(2) amounts taxed under TCGA92/S87 payments are matched first to the Schedule 4C pool, TCGA92/Sch4C/para8(4). Any outstanding section 2(2) amounts for the year of transfer will be included in the Schedule 4C pool. »Ê¹ÚÌåÓýapprefore this rule can apply only if the trustees have made gains in later years. It means that payments will be matched against an earlier year before a later year.

Any payments that are disregarded for the purposes of TCGA92/Sch4C can be matched against section 2(2) amounts taxed under TCGA92/S87. If the payments exceed the gains in the Schedule 4C pool these can also be matched against any TCGA92/S87 gains.

An exception to the rule in sub-paragraph 8(4) is if the trustees have a pool of offshore income gains. Payments are matched to those gains before gains in the Schedule 4C pool, TCGA92/Sch4C/para8(5).