CG25430 - Disposal of assets situated abroad: Example 2

An individual resident but not domiciled in the UK has a foreign bank account in a foreign currency, F. The rate of exchange is 2F = £1 throughout this example. The account contains the following entries:

Date - Amount
January 2009 Balance Nil
January 2009 Deposit: sale of foreign shares A 90,000F
- (cost 48,000F in December 2005) -
February 2009 Withdrawal: purchase of foreign 30,000F
- shares B -
March 2009 Withdrawal: brought to UK 30,000F

The gain arising is first calculated in sterling, thus:

- - £
Proceeds 90,000F 45,000
less Cost 48,000F 24,000
- Foreign Chargeable Gain 21,000

Next, the account is analysed into capital and gains to give the composition of the balance of the account (90,000F - 30,000F = 60,000F) immediately before the March transfer, turning the gain back into foreign currency thus:

- - Capital Capital Gain Total
January 2009 Deposit 48,000F 42,000F 90,000F
February 2009 Withdrawal to buy foreign shares 16,000F 14,000F 30,000F
- Balance 32,000F 28,000F 60,000F

The transfer of 30,000F is then split between capital and foreign chargeable gains according to the mixed fund rules (see CG25380+), so it is treated as containing 28,000F (£14,000) of gains and 2000F (£1000) capital. There is therefore a remittance of £14,000 of the gain on foreign shares A.