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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Effects of residence/domicile: residence etc: losses

Losses which accrue on disposals of assets are normally computed in the same way as gains would be, and a loss is generally an allowable loss if a gain accruing in the same circumstances would be a chargeable gain, TCGA92/S16(1) and TCGA92/S16(2).

For the years up to and including 2012-13 a loss accruing to a person in a year of assessment during no part of which they are resident or ordinarily resident in the United Kingdom is not an allowable loss unless the loss arises in connection with a branch or agency or permanent establishment in the UK, see CG13550 and CG57312, or unless the temporary non-residence rules apply so that it is deemed to accrue in the year (or period) of return to the UK, see CG26100+.

For 2013-14 and subsequent years a loss accruing to a person in a year of assessment for which they are not resident in the United Kingdom is not an allowable loss unless the loss arises in connection with a branch or agency or permanent establishment or the temporary non-residence rules mentioned above apply.

This symmetry between chargeable gains and allowable losses is subject to special rules which may apply to losses which accrue to non-UK domiciled individuals (see below) and to TCGA92/S16A which disallows losses resulting from arrangements intended to secure a tax advantage but has no effect on gains.

The rules governing losses which accrue to individuals not domiciled in the United Kingdom in respect of assets located outside the UK (‘foreign losses’) were changed by Finance Act 2008. Up to 5 April 2008 such losses were not allowable. From 2008-09 onwards, the critical factor is not the individual’s domicile but whether they have made an election under TCGA92/S16ZA for their foreign losses to be allowable. If there is no election, foreign losses are not allowable losses even if a gain arising in similar circumstances would have been a chargeable gain. If there is an election then foreign losses are allowable, subject to special rules. The making of an election is linked to the individual’s claiming the remittance basis of taxation. For guidance on foreign loss elections, see CG25330+. For guidance on the remittance basis, see the Residence, Domicile and Remittance Basis (RDRM) Manual and CG25300+.