Paragraph 1A F1F2

The following steps are to be taken for the purpose of calculating F3the section 1(3) amounts for a settlement that are outstanding at the end of a tax year (“the relevant tax year”).

• Step 1

  Find the 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, F4directly or indirectly by virtue of the matching of the section 1(3) amount for the settlement for a tax year (“the applicable year”) with a capital payment, chargeable gains are treated under section 87F5, 87K, 87L or 89(2) as accruing in the relevant tax year to F6an individual who is not chargeable to tax for that year.

  Increase the 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 F7an individual is “chargeable to tax” for a tax year ifF8, as respects that year, F9the individual F10is UK resident for the tax year (as determined in accordance with Chapter 1 of Part 1 of this Act).