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HMRC internal manual

Capital Gains Manual

Arrival in and departure from UK: temporary non-residence: main conditions for TCGA92/S10A to apply - year of departure 2012-13 or earlier

CG26110 outlined the basic proposition whereby gains of an individual made whilst temporarily resident outside the UK will be charged to Capital Gains Tax for the tax year of their return to the UK. For TCGA92/S10A to apply, all four of the conditions in subsection (1) must be met. Three of the four conditions refer to specific ‘residence requirements’: an individual satisfies those residence requirements for a year of assessment if

  • during any part of that year of assessment he is resident in the UK and not treaty non-resident, or
  • he is ordinarily resident in the UK during that year of assessment, unless he is treaty non-resident during that year

First condition: TCGA92/S10A(1)(a)

The individual must satisfy the residence requirements for a year of assessment, known as ‘the year of return’.

Second condition: TCGA92/S10A(1)(b)

There must be one or more years of assessment immediately before the year of return in which the individual did not satisfy the residence requirements, but there are also years before that year in which he did satisfy the requirements.

Third condition: TCGA92/S10A(1)(c)

There are fewer than five years of assessment between the year of departure and the year of return. (The ‘year of departure’ is the last year of assessment before the year of return in which the individual satisfied the residence requirements.)

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Fourth condition: TCGA92/S10A(1)(d)

The individual satisfied the residence conditions in four of the seven years of assessment immediately preceding the year of departure.

If all of the four conditions are met, TCGA92/S10A(2) provides, with certain exceptions (see CG26230), that all gains that would have been chargeable, and all losses that would have been allowable, if the individual had been tax resident during the intervening years, are to be treated as accruing in the tax year of return to the UK.

If any of the four conditions are not fulfilled then no charge to Capital Gains Tax can arise on a gain accruing on the disposal of an asset during the intervening years. Similarly losses accruing will not be allowable.

It may therefore be necessary to consider the residence position for up to 12 years prior to the year of return to the UK.