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HMRC internal manual

Capital Gains Manual

Remittance basis: losses: introduction

Losses on non-UK assets arising before 6 April 2008 to remittance basis users were not allowable losses. For tax year 2008-09 onwards an individual may elect that such “foreign losses” which arise in the year of election or subsequent years are allowable, subject to certain special rules, against chargeable gains (TCGA92/S16ZA). The election is irrevocable and has effect in the year it is made and all subsequent years.

The special rules for giving relief in respect of foreign losses have two main effects:

  • They prevent any loss (not just a foreign loss) of a later year being allowed against a foreign chargeable gain which arose in an earlier year but which is not remitted (and so not taxed) until the year of the loss or later (TCGA92/S16ZB). This is analogous to the “no carry back” rule where the remittance basis is not in point.
  • They limit the amount of losses available for relief against chargeable gains in a year by imposing a strict order in which they are matched with gains of various classes, including unremitted foreign chargeable gains (TCGA1992/S16ZC). Correct operation of these rules is likely to demand careful record-keeping by the taxpayer.

    For periods to 5 April 2012 special rules also applied in connection with losses from foreign currency bank accounts. See CG25393 for guidance.

    From 2017/18 losses on the disposal of foreign situs assets in a year will be allowable losses if the individual is deemed domiciled for the year and the losses were notified (see CG15813). Losses that accrued while a foreign loss election was in place (see CG25330A onwards), which have not been used (i.e. losses realised but not offset against gains under the special ordering rules), will be available to offset against gains once the taxpayer becomes deemed domiciled.

For guidance on the remittance basis, domicile and deemed domicile see the Residence, Domicile and Remittance Basis (RDRM) Manual.