Part III Individuals, partnerships, trusts and collective investment schemes etc

Chapter II Settlements

Migration of settlements, non-resident settlements and dual resident settlements

F187ASection 87: matching

(1)

This section supplements section 87.

(2)

The following steps are to be taken for the purposes of matching capital payments with section 2(2) amounts.

  • Step 1

    Find the section 2(2) amount for the relevant tax year.

  • Step 2

    Find the total amount of capital payments received by the beneficiaries from the trustees in the relevant tax year.

  • Step 3

    The section 2(2) amount for the relevant tax year is matched with—

    1. (a)

      if the total amount of capital payments received in the relevant tax year does not exceed the section 2(2) amount for the relevant tax year, each capital payment so received, and

    2. (b)

      otherwise, the relevant proportion of each of those capital payments.

    “The relevant proportion” is the section 2(2) amount for the relevant tax year divided by the total amount of capital payments received in the relevant tax year.

  • Step 4

    If paragraph (a) of Step 3 applies—

    1. (a)

      reduce the section 2(2) amount for the relevant tax year by the total amount of capital payments referred to there, and

    2. (b)

      reduce the amount of those capital payments to nil.

    If paragraph (b) of that Step applies—

    1. (a)

      reduce the section 2(2) amount for the relevant tax year to nil, and

    2. (b)

      reduce the amount of each of the capital payments referred to there by the relevant proportion of that capital payment.

  • Step 5

    Start again at Step 1 (unless subsection (3) applies).

    If the section 2(2) amount for the relevant tax year (as reduced under Step 4) is not nil, read references to capital payments received in the relevant tax year as references to capital payments received in the latest tax year which—

    1. (a)

      is before the last tax year for which Steps 1 to 4 have been undertaken, and

    2. (b)

      is a tax year in which capital payments (the amounts of which have not been reduced to nil) were received by beneficiaries.

    If the section 2(2) amount for the relevant tax year (as so reduced) is nil, read references to the section 2(2) amount for the relevant tax year as the section 2(2) amount for the latest tax year—

    1. (a)

      which is before the last tax year for which Steps 1 to 4 have been undertaken, and

    2. (b)

      for which the section 2(2) amount is not nil.

(3)

This subsection applies if—

(a)

all of the capital payments received by beneficiaries from the trustees in the relevant tax year or any earlier tax year have been reduced to nil, or

(b)

the section 2(2) amounts for the relevant tax year and all earlier tax years have been reduced to nil.

(4)

The effect of any reduction under Step 4 of subsection (2) is to be taken into account in any subsequent application of this section.