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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Computation of gain in non-sterling currency - example

Example of disposal within CTA10\S9C

On 1 September 2008 Finance One Ltd, a UK company with an US$ functional currency, acquired $200 of shares at a time when their Sterling value was £118.

On 1 September 2014 Finance 2 Ltd sold the shares to a third party for £350 sterling.

The computation is as follows:-

Third party sale 1 September 2014  
   
Proceeds of sale £350  
converted into US$ at the spot rate on 1/9/14 (£350 at 1.6) $560
Less base cost -$200
Indexation 9/08 to 9/14 -$46
   
Net gain on disposal calculated in US$ $314
   
Gain converted into sterling at spot rate on date of disposal £196

Example of disposal under CTA10/S9C following intra-group transfer within TCGA92/S171

On 1 September 2008 Finance One Ltd, a UK company with an US$ functional currency, acquired $200 of shares at a time when their Sterling value was £118.

On 1 September 2012 the shares were transferred to Finance Two Ltd, a fellow group company also with US$ functional currency, in a nil gain/loss transfer under TGCA92/S171 At that time the Sterling value of the shares was £125.

On 1 September 2014 Finance Two Ltd sold the shares to a third party for US$400.

The computations are as follows:-

Nil gain/loss transfer September 2012

Cost converted to Sterling at date of acquisition £118
   
Add indexation 9/08 to 9/12 £22
Total £140

Transfer deemed to take place for proceeds of £140, which will form the base cost of the asset for Finance Two Ltd. As this transfer takes place before CTA10/S9C comes into effect, the deemed proceeds are identified in sterling.

Third party sale September 2014

Proceeds in US$   $400
     
LESS Base cost £140  
Converted to US$ at deemed date of acquisition 9/12(£140 at 1.6)   -$224
LESS indexation* 9/12 to 9/14   -$24
     
Net gain on disposal calculated in US$   $156
Finally, the gain converted into sterling at the spot rate at date of    
disposal 1 September 2014   £97
  • Indexation calculated as normal on the $US amount.