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HMRC internal manual

Capital Gains Manual

Remittance basis: no effective carry back of foreign allowable losses: TCGA92/S16ZB

If an election has been made for foreign losses to remain allowable losses (see CG25330A) then a loss may not be set against chargeable gains taxable on the remittance basis in a tax year -known as the applicable tax year- after the foreign chargeable gains which are being remitted arose, if the foreign chargeable gain arose in a year before the loss. This means that a loss cannot be “carried back” and set against a foreign chargeable gain of an earlier year, even if that gain is not taxed until the year of loss because of the remittance basis.


Henri elects to use the remittance basis in 2008-09 and has an unremitted foreign chargeable gain of £1m in that year. He also elects for his foreign losses to remain allowable losses. In 2010-11 he remits the gain to the UK and has a foreign loss of £500,000. He does not elect to use the remittance basis in 2010-11. The relevant tax year is 2008-09 and the applicable tax year is 2010-11. Foreign chargeable gains accrued in or after the relevant tax year but before the applicable tax year and a chargeable gain is treated as accruing in the applicable tax year when those gains are remitted. The conditions of TCGA92/S16ZB(1) are therefore satisfied. The remitted gains are known as relevant gains and are excluded from the total amount of chargeable gains from which losses are deducted under TCGA92/S2. The relevant gains are nonetheless included in the amount on which Capital Gains Tax is charged for the applicable tax year (TCGA92/S16ZB(2)-(3)). So the £500,000 loss may not be set against the chargeable gain of £1m treated as accruing to Henri in 2010-2011.

Note that this prohibition of carry-back applies to all losses, not just to foreign losses.

Note also that this prohibition applies whether or not the remittance basis applies in the applicable year, ie the year in which the foreign chargeable gain is remitted.