7(1)This paragraph applies where, at or after the relevant time and before the capital distribution, there has been a transfer of value which satisfies the conditions stated in paragraph 11(2) below.
(2)So far as the amount on which tax is chargeable, when added to the amount of all previous distribution payments made out of property comprised in the settlement, does not exceed the initial value, the rate chargeable shall be equal to the fraction of which—
(a)the numerator is the amount of the tax which would have been charged on the value transferred by the relevant transfer, or such part of that amount as is attributable to the initial value, if the value so transferred had been equal to the aggregate of the initial values of the settlement and any related settlement; and
(b)the denominator is the initial value.
(3)So far as the amount on which tax is chargeable, when so added, exceeds the initial value, the rate or rates chargeable shall be the rate or rates that would be applicable if the assumed transferor had made previous chargeable transfers and the aggregate of the values transferred by them were equal to the aggregate of—
(a)the values transferred by any chargeable transfers which the person who made the relevant transfer had made before the relevant transfer;
(b)the aggregate of the initial values of the settlement and any related settlement; and
(c)the amounts of any previous distribution payments out of property comprised in the settlement, so far as the tax (if any) chargeable thereon is chargeable in accordance with this sub-paragraph.