RDRM31170 - Remittance Basis: Introduction to the Remittance Basis: Foreign Income and Gains: Foreign chargeable gains

Foreign chargeable gains means chargeable gains accruing from the disposal of an asset which is situated outside the United Kingdom - refer to TCGA1992/s12(4).

For years up to 5 April 2013 (2012-2013 tax year) only, an individual who is Not Ordinarily Resident in the UK but is UK domiciled and who claims the remittance basis of taxation, does not qualify to be taxed on the remittance basis in respect of their chargeable gains and is still taxed on the arising basis. They will, however, still lose the Annual Exempt Amount for capital gains purposes as well as their personal allowances if they claim the remittance basis (Refer to RDRM32040 Loss of Personal Allowances/Annual Exempt Amount).

The concept of ordinarily resident and by default not ordinarily resident was made obsolete upon the introduction of the Statutory Residence Test (SRT), from 6 April 2013. Only those individuals who are non-UK domiciled can claim the remittance basis from that date.

Note: The examples in this and later Chapters are designed simply to illustrate the basic principles. The Chapters use the phrase remittance of ‘foreign chargeable gains’, or refer to such gains being ‘remitted’. This phrase is used throughout as convenient shorthand. Foreign chargeable gains will usually be part of the proceeds from the sale of an asset, which will likely be a mixed fund. You will need to refer to this Chapter together with RDRM35000 in order to identify and quantify remittances of gains out of proceeds.

Foreign losses

With the exception of individuals who may use the remittance basis under ITA07/s809D or s809E without claim (refer to RDRM32100: Exceptions to the claim requirements), non-domiciled remittance basis users are required to make an election under TCGA1992/s16ZA if they want their overseas losses to be offset against foreign chargeable gains.

The election should be made for the first year for which the remittance basis is claimed, irrespective of whether the individual has any foreign chargeable gains or overseas losses in that year. The election will usually be expected to be made within the white space in the Capital Gains supplementary pages of the same SA Return as the first remittance basis claim is made. The election is irrevocable.

The usual time limits for claims/elections at TMA70/s42 and 43 apply. Refer to the Self Assessment Claims Manual (SACM) for further information about claim time limits.

If an election has been made then, in a tax year in which the remittance basis applies (and the individual is not domiciled in the United Kingdom), special rules apply to determine how gains are to be relieved by losses. In summary, the allowable losses under TCGA92/S2 are matched:

  • Firstly, against foreign chargeable gains accruing in the tax year to the extent that they are remitted to the United Kingdom in that year
  • Secondly, against foreign chargeable gains accruing in that year to the extent that they are not so remitted and
  • Thirdly, against chargeable gains accruing in that year other than foreign chargeable gains

You should refer to the Capital Gains Manual (CG25330+) for full details.

If the individual does not make an election, relief cannot be allowed in respect of any foreign losses accruing to them in that year, or any future tax year in which they remain not domiciled in the United Kingdom (whether or not they claim or use the remittance basis in those later years).

The introduction of deemed domicile (from 2017-2018) changes

The s16ZA election will remain in force unless the individual acquires an actual UK domicile or becomes deemed UK domiciled. If the individual is non-UK domiciled the election will be in force for tax years in which the individual is chargeable on the arising basis of assessment.

If a previously non-domiciled individual becomes deemed domiciled in the UK or acquires an actual UK domicile, losses on the disposal of foreign situs assets that arise in the year they become deemed domiciled and in later years are allowable losses under the normal rules. See CG25330 for more information.

If a deemed domicile individual loses their deemed domicile status, (by becoming non-UK resident for at least 6 years for example); should they return to the UK and become resident a fresh s16ZA election will need to be made for this later period. See CG25330A for more information.