If section 90 of TCGA 1992 (as originally enacted) applied to a transfer of settled property made before 6 April 2008, this paragraph applies in relation to the transferor settlement and the transferee settlement.

In this paragraph “the year of transfer” means the tax year in which the transfer occurred.

The following steps are to be taken for the purpose of calculating the section 2(2) amount for the transferor and transferee settlements for the tax year 2007-08 and earlier tax years.

• Step 1

  Take the steps in paragraph 120(2) for the purpose of calculating the section 2(2) amount (at the end of the year of transfer) for the transferor settlement for the year of transfer and earlier tax years.

  For this purpose, read references there to the tax year 2007-08 as references to the year of transfer.

• Step 2

  Take the steps in paragraph 120(2) for the purpose of calculating the section 2(2) amount (before the year of transfer) for the transferee settlement for the tax year before the year of transfer and earlier tax years.

  For this purpose, read references there to the tax year 2007-08 as references to the tax year before the year of transfer.

• Step 3

  Calculate the section 2(2) amount for the transferee settlement for the year of transfer.

• Step 4

  Treat the section 2(2) amount for the transferee settlement for the year of transfer or any earlier tax year (as calculated under Step 2 or 3) as increased by—

  1. a

     the section 2(2) amount for the transferor settlement for that year (as calculated under Step 1), or

  2. b

     if part only of the settled property was transferred, the relevant proportion of the amount mentioned in paragraph (a).

  “The relevant proportion” here has the same meaning as in section 90(4) of TCGA 1992 (as substituted by this Schedule).

• Step 5

  Treat the section 2(2) amount for the transferor settlement for any tax year as reduced by the amount by which the section 2(2) amount for the transferee settlement for that year is increased under Step 4.

• Step 6

  Take the steps in paragraph 120(2) for the purpose of calculating the section 2(2) amount for the transferor settlement for the tax year 2007-08 and earlier tax years.

  For this purpose—

  1. a

     treat the section 2(2) amount for the year of transfer or any earlier tax year as the amount calculated by taking Steps 1 and 5 above, and

  2. b

     reduce the total deemed gains by the amount of the total deemed gains calculated by taking Step 1 above.

• Step 7

  Take the steps in paragraph 120(2) for the purpose of calculating the section 2(2) amount for the transferee settlement for the tax year 2007-08 and earlier tax years.

  For this purpose—

  1. a

     treat the section 2(2) amount for the year of transfer or any earlier tax year as the amount calculated by taking Steps 2 to 4 above, and

  2. b

     reduce the total deemed gains by the amount of the total deemed gains calculated by taking Step 2 above.

This paragraph applies with any necessary modifications in relation to a settlement as respects which more than one relevant transfer was made.

If, before 6 April 2008, the trustees of the transferor or transferee settlement made a transfer of value to which Schedule 4B to TCGA 1992 applied, this paragraph has effect subject to such modifications as are just and reasonable on account of Schedule 4C to that Act having applied in relation to the settlement.