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CG38695 | Calculating the TCGA/S87 gain

From HM Revenue & Customs · Capital Gains Manual

The basic operation of TCGA92/S87 is:

  • capital payments received by the beneficiaries are matched against the trustees’ section 1(3) amount for a year

  • the beneficiary is treated as accruing a chargeable gain equal to the amount matched

  • the gain accrues to the beneficiary in the year the payment is matched not the year the capital payment is received

  • the trustees' section 1(3) amount for that year and the capital payment are reduced by the amount of the matched payment.

The rules relating to the matching of capital payments changed from 6 April 2018. The rules from 6 April 2018 are detailed in this manual from CG38702 and before this date from CG38721.

If a capital payment is matched against a section 1(3) amount for a tax year that is more than a year earlier the rate of tax is increased by 10% for a maximum of six years. For example, if a capital payment received in 2023-24 is matched against a section 1(3) amount for 2021-22 the rate of tax is increased by 20%, see CG38795 or the Helpsheet 301 for the year the capital payment is matched.