This Schedule applies where the trustees of a settlement (“the transferor settlement”) make a transfer of value to which Schedule 4B applies (“the original transfer”).

The transferor settlement is regarded for the purposes of this Schedule as having a “Schedule 4C pool”.

The Schedule 4C pool contains F22the section 1(3) amounts for the settlement that are outstanding at the end of the tax year in which the original transfer is made (see paragraph 1A).

Paragraphs 8 to 9 provide for the attribution of gains in a settlement’s Schedule 4C pool.

References in this Schedule to a transfer to which Schedule 4B applies include any such transfer, whether or not any chargeable gain or allowable loss accrues under that Schedule by virtue of the transfer.

The following steps are to be taken for the purpose of calculating F22the section 1(3) amounts for a settlement that are outstanding at the end of a tax year (“the relevant tax year”).

• Step 1

  Find F22the section 1(3) amount for the settlement for the relevant tax year and earlier tax years, as reduced under section 87A as it applies for the relevant tax year and earlier tax years.

• Step 2

  This Step applies if, F25directly or indirectly by virtue of the matching of F22the section 1(3) amount for the settlement for a tax year (“the applicable year”) with a capital payment, chargeable gains are treated under section 87F15, 87K, 87L or 89(2) as accruing in the relevant tax year to F67an individual who is not chargeable to tax for that year.

  Increase F22the section 1(3) amount for the applicable year (found under Step 1) by the amount of the chargeable gains.

For the purposes of Step 1 of sub-paragraph (1) take into account the effect of section 90 in relation to any transfer of settled property from or to the trustees of the settlement made in or before the relevant tax year.

For the purposes of this Schedule F63an individual is “chargeable to tax” for a tax year ifF13, as respects that year, F26the individualF19is UK resident for the tax year (as determined in accordance with Chapter 1 of Part 1 of this Act).

This paragraph explains what is meant for the purposes of this Schedule by “Schedule 4B trust gains”.

The Schedule 4B trust gains are computed in relation to each transfer of value to which that Schedule applies.

In relation to a transfer of value the amount of the Schedule 4B trust gains for the purposes of this Schedule is given by—

If the transfer of value is made in a year of assessment during which the trustees of the transferor settlement are F17at no time resident F42... in the United Kingdom the chargeable amount is computed under this paragraph.

Where this paragraph applies the chargeable amount is the amount on which the trustees would have been chargeable to tax under F9section 1(3) by virtue of Schedule 4B if they had been F46resident F58... in the United Kingdom in the year F41(and had made the disposals which Schedule 4B treats them as having made).

Where (apart from this sub-paragraph) the chargeable amount mentioned in sub-paragraph (2) would include a chargeable gain or allowable loss to which section 1A(3)(b) or (c) applies (disposals by non-UK residents within the charge to capital gains tax), so much of the gain or loss as would be so included is to be disregarded for the purposes of determining the chargeable amount.

For this purpose “protected assets” has the meaning given by section 88(4).

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In determining for the purposes of sub-paragraph (1)(a) the amount of chargeable gains arising by virtue of a transfer of value that are treated as accruing to the settlor, there shall be disregarded any losses which arise otherwise than by virtue of Schedule 4B.

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An allowable loss arising under Schedule 4B in relation to a transfer of value by the trustees of a settlement may be taken into account in accordance with this paragraph to reduce for the purposes of this Schedule the chargeable amount in relation to another transfer of value by those trustees.

Any such allowable loss goes first to reduce chargeable amounts arising from other transfers of value made in the same year of assessment.

If there is more than one chargeable amount and the aggregate amount of the allowable losses is less than the aggregate of the chargeable amounts, each of the chargeable amounts is reduced proportionately.

If in any year of assessment the aggregate amount of the allowable losses exceeds the aggregate of the chargeable amounts, the excess shall be carried forward to the next year of assessment and treated for the purposes of this paragraph as if it were an allowable loss arising in relation to a transfer of value made in that year.

Any reduction of a chargeable amount under this paragraph is made after any deduction under paragraph 6.

This paragraph applies if the trustees of the transferor settlement make a further transfer of value to which Schedule 4B applies in a tax year (“the year of the transfer”) after the tax year mentioned in paragraph 1(3).

If the settlement does not have a Schedule 4C pool at the beginning of the year of the transfer, this Schedule applies in relation to the further transfer as it applied in relation to the original transfer.

For the purposes of this paragraph a settlement has a Schedule 4C pool until the end of the tax year in which all section 2(2) amounts in the pool have been reduced to nil.

Chargeable gains are treated as accruing in a tax year (“the relevant tax year”) to a beneficiary who has received a capital payment from the trustees of a relevant settlement in the relevant tax year or any earlier tax year if all or part of the capital payment is matched (under section 87A as it applies for the relevant tax year) with the section 2(2) amount in the Schedule 4C pool for the relevant tax year or any earlier tax year.

Section 87A applies for a tax year by virtue of this paragraph before it applies for that year otherwise than by virtue of this paragraph; but this is subject to sub-paragraph (5).

If section 87A applies for a tax year by virtue of section 762(3) of the Taxes Act (offshore income gains), it applies for that year by virtue of that provision before it applies for that year by virtue of this paragraph.

Sections 87G(2), 87K(2) and 87L(2) (capital payment treated for purposes of sections 87 and 87A as received by someone other than actual recipient) apply also for the purposes of this paragraph, but this is subject to paragraph 9.

This paragraph specifies what settlements are relevant settlements in relation to a Schedule 4C pool.

The transferor and transferee settlements in relation to the original transfer of value are relevant settlements.

If the trustees of a settlement that is a relevant settlement in relation to a Schedule 4C pool make a transfer of value to which Schedule 4B applies, any other settlement that is a relevant settlement in relation to that pool is also a relevant settlement in relation to the Schedule 4C pool arising from the further transfer.

For the purposes of paragraph 8 (and section 87A as it applies for the purposes of that paragraph), no account is to be taken of a capital payment to which any of sub-paragraphs (2) to (4) applies (or a part of a capital payment to which sub-paragraph (4) applies).

This sub-paragraph applies to a capital payment received before the tax year preceding the tax year in which the original transfer is made.

Subject to F18paragraph 9(3), it is immaterial for the purposes of paragraph 8 that the trustees F16of any relevant settlement are or have at any time been F36resident F43... in the United Kingdom.

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The amount of chargeable gains treated as mentioned in sub-paragraph (1)(a) as accruing to the settlor in the F56period of return is limited to F22the section 1(3) amount referred to in sub-paragraph (1)(b).

Where the property comprised in the transferor settlement has at any time included property not originating from the settlor, only so much (if any) of any capital payment taken into account for the purposes of paragraph 8 above as, on a just and reasonable apportionment, is properly referable to property originating from the settlor shall be taken into account in computing the amount charged to beneficiaries.

Expressions used in this paragraph and F28section 1M have the same meanings in this paragraph as in that section; and paragraph 8 of Schedule 5 shall apply for the construction of the references in sub-paragraph (4) above to property originating from the settlor as it applies for the purposes of that Schedule.

This paragraph applies where by virtue of F65section 1M an amount of gains would (apart from this Schedule) be treated under section 87 as accruing to a person (“the beneficiary”) in the F21period of return by virtue of a capital payment made to him in F53the temporary period of non-residence.

Where this paragraph applies, a capital payment equal to so much of that capital payment as exceeds the amount otherwise charged shall be deemed for the purposes of this Schedule to be made to the beneficiary in the year of return.

The “amount otherwise charged” means the total of any chargeable gains attributed to the beneficiary under section F1187(2) or 89(2) by virtue of the capital payment.

For the purposes of paragraph 13(5)(b) a deemed capital payment under this paragraph shall be treated as made when the actual capital payment mentioned in sub-paragraph (1) above was made.

Expressions used in this paragraph and F7section 1M have the same meanings in this paragraph as in that section.

Where part of a capital payment is matched, references in sub-paragraphs (2) and (3) to the capital payment are to the part matched.

The tax payable by the beneficiary in respect of the payment shall be increased by the amount found under sub-paragraph (3) below, except that it shall not be increased beyond the amount of the payment; and an assessment may charge tax accordingly.

The amount is one equal to the interest that would be yielded if an amount equal to the tax which would be payable by the beneficiary in respect of the payment (apart from this paragraph) carried interest for the chargeable period at the specified rate.

The “specified rate” means the rate for the time being specified in section 91(3).