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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Arrival in and departure from the UK: Extra Statutory Concession D2 - to 5 April 2013

For individuals the strict treatment referred to in CG25700 is relaxed in certain circumstances by ESCD2. The text of the concession can be found at CG25791.

Where the conditions of paragraph 1 of ESCD2 are satisfied the concession allows the year of commencement of residence in the United Kingdom to be split for Capital Gains Tax purposes. Gains accruing in that year in the period before an individual becomes resident and ordinarily resident are not charged. Paragraph 2 of ESCD2 allows the year in which an individual ceases to be resident in the UK to be split: gains accruing in that year in the period after residence ceases are not charged.

The effect of ESC D2 may on occasion be described as giving ‘split year’ (rather than concessionary) treatment because this term broadly describes it’s effect. However care should be taken when using the term ‘split year’. This is because within the introduction of the Statutory Residence Test the term ‘split-year’ has a defined meaning for 2013-14 and subsequent years.

The concessionary treatment cannot operate to render unallowable losses which would, under the normal operation of TCGA92/S2, be allowable. Thus a loss which accrues in the tax year in which an individual becomes resident or ordinarily resident in the UK, but before their actual date of arrival, is an allowable loss whether or not the conditions of ESCD2 paragraph 1 are satisfied. Similarly, a loss which accrues in the tax year in which an individual ceases to be resident and ordinarily resident in the UK, and after their actual date of departure, is an allowable loss whether or not the conditions of ESCD2 paragraph 2 are satisfied.

ESCD2 was amended as part of the Capital Gains Tax reforms introduced by Finance Act 1998, so that the conditions to be satisfied in any particular case depend on the date of arrival. If you have a case in which an individual arrived in the UK before 6 April 1998, or departed before 17 March 1998, you should make a submission to Specialist PT (CG Technical), Royal House, Prince’s Gate, 2-6 Homer Road, Solihull, West Midlands, B91 3WG.