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HMRC internal manual

Capital Gains Manual

Effects of residence/domicile: persons changing residence status

For years up to and including 2012-13 a person’s residence position could change part-way through a year of assessment. For example, someone who was never resident or ordinarily resident in the UK may have settled here and become resident and ordinarily resident or someone who was resident and ordinarily resident may emigrate and thereby become not resident and not ordinarily resident. Capital Gains Tax is assessed for a year of assessment or tax year and so we have to consider the consequences of any change of residence status during a tax year.

The legislation (TCGA92/S2) stated that if a person is

• resident or ordinarily resident

• for any part of the year of assessment

then the person is within the charge to Capital Gains Tax for the whole of the year. On this basis, someone arriving in the UK and becoming resident during a year is within the charge for the whole year. They can be assessed on gains realised in the period from the preceding 6 April to the date they become resident. Similarly someone emigrating remains chargeable on gains made between the date of departure and the following 5 April.

For 2013-14 and subsequent years a Statutory Residence Test was introduced and amendments were made to TCGA92/S2. For these years an individual will be either resident or not resident for the year of assessment.

Detailed guidance on the Statutory Residence Test can be found in the RDR3 Guidance Note: Statutory Residence Test (SRT).

By contrast, Corporation Tax is assessed for an accounting period and the statute ensures that an accounting period begins when a company becomes resident in the UK and ends when it ceases so to be, see CTM01400+ (ICTA88/S12) (CTA09/S9 and CTA09/S10). Note that, as a separate matter, a company may be liable to an exit charge in respect of its chargeable assets when it ceases to be resident in the UK. See CG42300+ for further details.