Paragraph 2 TCGA 1992

TCGA 1992 is amended as follows.

In section 1H (the main rates of CGT)—

In section 1I (income taxed at higher rates or gains exceeding unused basic rate band), omit subsection (A1).

In section 1M (temporary non-residents), after subsection (1) insert—

“(1A)

Subsection (1) does not apply to a gain that accrues to an individual who was temporarily non-resident in tax year 2025-26 or an earlier tax year under section 103KA(2) or (3) of TCGA 1992 (as it then had effect).

But see section 23M of ITTOIA 2005 which charges the amount of the gain to income tax in the period of return.”

In section 86 (attribution of gains to settlors with interest in non-resident or dual resident settlements), for subsection (4ZB), substitute—

“(4ZB)

Where (apart from this subsection) the amount mentioned in subsection (1)(e) would include an amount of chargeable gains accruing by virtue of the trustee’s entitlement to a sum of carried interest, the amount of the gains is to be disregarded for the purposes of subsection (1)(e).

(4ZC)

In subsection (4ZB)—

(a)

“carried interest” has the same meaning as in section 23I of ITTOIA 2005 (see Part 1 of Schedule A1 to that Act), and

(b)

that definition has effect as if references to a sum arising to an individual included a reference to a sum arising to the trustees.”

In section 87 (non-UK resident settlements: attribution of gains to beneficiaries), for subsection (5B) substitute—

“(5B)

Where (apart from this subsection)—

(a)

the amount mentioned in subsection (4)(a) would include an amount of chargeable gains accruing by virtue of the trustee’s entitlement to a sum of carried interest, and

(b)

at the time when those chargeable gains accrue, income tax is chargeable by virtue of section 23I of ITTOIA 2005 in respect of the sum of carried interest,

the amount of the gains is to be disregarded for the purposes of determining the section 1(3) amount.

(5C)

In subsection (5B) and section 87BA—

(a)

“carried interest” has the same meaning as in section 23I of ITTOIA 2005 (see Part 1 of Schedule A1 to that Act), and

(b)

that definition has effect as if references to a sum arising to an individual included a reference to a sum arising to the trustees.”

After section 87B insert—

“Sections 87 and 87A: disregard of capital payments made from carried interest gains

87BA

(1)

This section applies to a settlement where—

(a)

a chargeable gain accruing by virtue of the trustee’s entitlement to a sum of carried interest in respect of which income tax is chargeable by virtue of section 23I of ITTOIA 2005 (“a carried interest gain”) is or has been disregarded for the purposes of determining the section 1(3) amount for the settlement for a tax year as a result of section 87(5B), and

(b)

the unused disregarded amount in relation to the carried interest gain is not nil.

(2)

For the purposes of sections 87 and 87A as they apply in relation to the settlement, no account is to be taken of a capital payment (or part of a capital payment) received by a beneficiary from the trustees at or after the time when the carried interest gain accrued if (or to the extent that) the amount of the capital payment does not exceed the unused disregarded amount.

(3)

But if subsection (2) applies in a case where—

(a)

two or more capital payments are received by beneficiaries at the same time, and

(b)

the total of those capital payments exceeds the unused disregarded amount,

no account is to be taken of the amount of each capital payment that is the relevant proportion of the unused disregarded amount.

(4)

In subsection (3), the “relevant proportion” means the proportion that the amount of the capital payment concerned bears to the total amount of all of the capital payments received by beneficiaries at the same time.

(5)

In this section the “unused disregarded amount”, in relation to a carried interest gain, means—

(a)

the sum of—

(i)

the amount of the carried interest gain, and

(ii)

the amount of any other carried interest gains that accrued to the trustees prior to the carried interest gain accruing that are or have been disregarded for the purposes of determining the section 1(3) amount for the settlement for a tax year as a result of section 87(5B), minus

(b)

the amount of any capital payments (or part of capital payments) received by beneficiaries from the trustees of which no account has been taken as a result of the application of this section.”

For section 103KA (carried interest) substitute—

“Carried interest: no chargeable gain

103KA

(1)

This section applies where—

(a)

an individual performs investment management services directly or indirectly in respect of an investment scheme under any arrangements, and

(b)

the individual is entitled to carried interest under the arrangements.

(2)

Any gain or loss accruing to the individual by virtue of the individual’s entitlement to carried interest is treated as not accruing.

(3)

In this section “arrangements”, “carried interest”, “investment scheme” and “investment management services” have the same meaning as in section 23I of ITTOIA 2005 (see section 23R of and Part 1 of Schedule A1 to that Act).”

Omit sections 103KB to 103KE.

In section 103KF (relief for external investors on disposal of partnership asset), after subsection (2) insert—

“(3)

In this section, “external investor” and “investment scheme” have the same meaning as in section 23I of ITTOIA 2005 (see section 23R of that Act).”

Omit sections 103KFA to 103KH.