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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Rates of tax: 2010-11: example of transitional rule: temporary non-residence

An individual resumes UK residence in 2010-11 following a period of temporary non-residence. The conditions for TCGA92/S10A to apply are satisfied and as a result a gain of £20,000 and a loss of £5,000 are treated as accruing to him during 2010-11. In addition he realises a chargeable gain of £60,000 in December 2010. He has taxable income of £15,000 in 2010-11 after all allowances. The annual exempt amount is £10,100 and the basic rate band is £37,400.

The transitional rule (FB10/SCH1, paragraph 19) treats the gain of £20,000 as accruing before 23 June 2010 and so it is liable to be taxed at 18%.

The loss of £5,000 is to be used in whatever way is most beneficial, see CG21600+. This means setting it off against the gain of £60,000 that could otherwise be taxed at 28%.

The annual exempt amount is also used in whatever way is most beneficial and so he sets it against the net gain after losses of £55,000 that could otherwise be taxed at 28%. The amount of that gain subject to Capital Gains Tax is £44,900 (£55,000 less £10,100).

The amount of the unused basic rate band is £22,400 (£37,400 less £15,000).

£22,400 of the gain of £44,900 is taxed at 18%, leaving £22,500 to be taxed at 28%.

So the Capital Gains Tax payable is £13,932 (£22,500 at 28% plus £22,400 and £20,000 at 18%).