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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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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:

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.