CG12400 - Location of assets

Importance for charge to tax

Circumstances in which the existence of a tax charge on any gains depends on the location of assets include

  • disposals of assets by an individual who is resident in the UK but who is not domiciled, and not deemed domiciled in the UK. Gains on disposals of assets situated outside the UK may be chargeable only to the extent that they are remitted to the UK, see Sch.1 and CG25300P. Guidance on deemed domicile is within the Residence, Domicile and Remittance Basis Manual.
  • a transfer abroad of an asset situated in the UK by a person, other than a company, who is not resident in the UK but who is carrying on a trade, profession or vocation in the UK through a branch or agency is chargeable provided such persons have either
    • used the assets in or for the purposes of the trade, profession or vocation, or
    • used or held assets for the purposes of the branch or agency, see s25 and CG25530.

Importance for reliefs

The availability of roll-over relief for persons who are not resident at the date of disposal of the old assets and at the date of acquisition of the new assets may be dependent on the location of assets. Only assets which are liable to a charge under s1B, under s2B, or under s14B (from 6 April 2015 to 5 April 2019), see CG73700C, or s1A(3) (from 6 April 2019), see CG73920P can qualify for roll-over relief in these circumstances, see s159 and CG60260+.

Types of asset

S275(1) specifies the location of several types of asset:

  • Land and buildings are located in the country where they are found. This applies to all rights and interests in the land and buildings. It will therefore apply to leases of land, tenancies etc., see s275(1)(a).
  • Chattels are located where they are found at any point in time. This applies to all rights and interests over such assets also. Therefore a lease of a chattel can change from being located in the UK to being located elsewhere if the chattel is removed from the UK to another country., see s275(1)(b).
  • Debts – For judgment debts, that is, debts created by the judgments, decrees, etc, of courts of record, see s275(1)(k). For other debts, see s275(1)(c). An exception to this rule applied for certain foreign currency bank accounts, see below.
  • Ships and aircraft, see s275(1)(f).
  • Goodwill, see s275(1)(g). If the trade etc is carried on in more than one country part of the goodwill appropriate to the part of the trade etc carried on in any one country should be treated as located in that country.
  • Patents, trademarks etc, see s275(1)(h). If registered in more than one register they are situated where each register is situated. Rights or licences to use one of these types of assets are situated in the UK if they or any right derived from them are exercisable in the UK.
  • Copyright, design rights, franchises etc, see s275(1)(j).
  • Foreign currency bank accounts, see s275(1)(l) and CG78320+.
  • Shares and securities, see s275(1)(d), s275(da) and s275(e)
  • Bearer shares - The location of bearer securities issued by any body other than a municipal or governmental authority or any body created by such an authority, or a company incorporated in the UK is not covered by a specific capital gains rule. Therefore it has to be decided in accordance with general law. General law provides that such securities are located where the certificate is located.
  • Letters of allotment should be treated as located in the country where the company issuing the letters is registered. In the case of Young v Phillips 58 TC 232 bonus shares were issued in respect of registered shares located in the UK. The issue was made in letter of allotment form. The letters were then taken to the Channel Islands and disposed of there. It was held that the letters of allotment were located in the UK because they evidenced rights which were properly enforceable only in the UK.
  • Securities of International or European Organisations - s265 allows the Treasury to designate for special treatment certain organisations whose membership includes the UK or any of the Communities of which the UK is a member. Once such an organisation has been designated any securities issued by it are deemed for the purposes of Capital Gains Tax to be located outside the UK. The list of organisations that have been designated under this provision is as follows.
    • International Bank for Reconstruction and Development
    • Asian Development Bank
    • African Development Bank
    • The European Economic Community
    • The European Investment Bank
    • The European Bank for Reconstruction and Development
    • The European Coal and Steel Community
    • The European Atomic Energy Community
  • Securities issued by the Inter-American Development Bank, see s266.

Specific assets

Where the TCGA does not otherwise apply to determine the situation of an intangible asset or whether it is situated in the UK, for instance where none of the provisions of s275 apply, it is necessary to consider the rules in s275A.

If the intangible asset is subject to UK law when it is created, then it is taken to be situated in the UK at all times.

But if the asset is a future or option it may be situated in the UK even if it was not subject to UK law at the time it was created. In order to establish the location of such a future or option it is necessary to consider its underlying subject matter, that is to say the property which would have to be delivered if the future were to run to delivery or the option were to be exercised.

Under s275A(6), if the underlying subject matter is or includes an intangible asset which is either

  • subject to UK law when it was created and its location would not otherwise be determined or 
  • treated as being subject to UK law by virtue of a further application of the rule, then 

the future or option is treated for the purposes of s275A as itself being subject to UK law at the time it is created, with the result that it is taken to be situated in the UK at all times, see 275A(5).

S275(8) can only apply if s275A(6) does not make a future or option situated in the UK. If the underlying subject matter of the future or option is or includes an asset (not necessarily an intangible asset) which either

  • Is situated in the UK at any time by virtue of any other provision of the TCGA, or 
  • Is or includes shares or securities issued by a company incorporated in the UK, but which have not been issued at the time the future or option is created, or 
  • Is treated as being situated in the UK by virtue of a further application of the second rule, then 

the future or option is taken to be situated in the UK at any time when the asset which is its underlying subject matter is itself taken to be situated in the UK. (Where the underlying asset is or includes unissued shares or debentures, they are taken to be situated in the UK at all times.) s275A(7).

Interaction between general law and capital gains legislation

Where the capital gains legislation requires a treatment which differs from the treatment under general law we apply the treatment required by the capital gains legislation. However if there is no capital gains legislation covering a particular type of asset, the general law is used for Capital Gains Tax purposes.

Interests of co-owners

Assets may be co-owned by more than one person who together own the asset either jointly or in common, and in equal or unequal parts. Each co-owner thereby has an interest in the asset, and the situation of that interest is the same as the situation of the asset as it would be were the asset wholly-owned by the person holding the interest, see s275C.

Assets held by a partnership, in which the partners therefore each have an interest, are within the scope of this provision.