CG78320 - Chattels and other assets: foreign currency bank accounts: Capital Gains Tax treatment
When foreign currency is held in a bank account and the account has a credit balance, the account is an asset for the purposes of capital gains tax.
For capital gains purposes all gains and losses must be computed in sterling (see CG78310) so on the disposal of all or part of this asset a capital gain or loss may arise.
Although the principles that apply are relatively straightforward their application is less so primarily because of the number and complexity of computations that may be required to calculate the actual gains or losses that arise.
Changes were introduced from 6 April 2008 and 16 December 2009 in connection with the taxation of non-domiciled individuals.
From 6 April 2012 the treatment of foreign currency bank accounts was simplified. From that date the treatment of foreign currency bank accounts for individuals, trustees and personal representatives (including members of a partnership) were aligned with the treatment of ‘simple debts’. TCGA92/S252. Such debts will not give rise to chargeable gains (or allowable losses) in the hands of the original creditor.
Periods from 6 April 2012
From 6 April 2012 the treatment of foreign currency bank accounts was significantly simplified. From that date the treatment of foreign currency bank accounts for individuals, trustees and personal representatives (including members of a partnership) were aligned with the treatment of ‘simple debts’.
‘Simple debts’ will not give rise to chargeable gains (or allowable losses) in the hands of the original creditor.
The changes made from 6 April 2012 do not apply to foreign currency for which the existing rules continue to apply see CG78300+.
The changes to the treatment of foreign currency bank accounts from 6 April 2012 does not affect the tax treatment of any other type of currency-related asset, such as options, futures or other types of investment that are not foreign currency bank accounts.
Although from 6 April 2012 gains will no longer arise on foreign currency bank accounts, there may have been gains that arose before 6 April 2012 which still need to be brought into account. In particular -
- Persons liable to CGT by virtue of s.87 TCGA may become liable in 2012-13, or later, in respect of chargeable gains on foreign currency bank accounts where the non-resident trustees made the relevant disposal before 6 April 2012, but the capital payment giving rise to the chargeable gain under s.87 is made on or after that date. See CG38570c for more detail on the application of s87.
- Foreign chargeable gains remitted by a non-domiciled individual in 2012-13 or a later year may include chargeable gains on disposals of foreign currency bank accounts that arose before 6 April 2012. See CG25312+ and the Residence, Domicile and Remittances Manual (RDRM) for further details on the remittance basis.