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HMRC internal manual

Capital Gains Manual

Foreign currency: foreign currency bank accounts - periods up to 5 April 2012


When foreign currency was deposited in a bank account there was, for Capital Gains Tax purposes, a disposal of the currency for its sterling value at that time. The deposit established or increased a debt due by the bank to the depositor. Apart from the debt on a security, a debt is not a chargeable asset in the hands of the original creditor, see CG53400+. But for periods to 5 April 2012 TCGA92/S252 prevented that exemption from applying to a debt which was not in sterling and which represented a credit balance in a bank account. Such a debt was a chargeable asset and each withdrawal from the account was a (part) disposal of the debt. Consideration for the disposal may have taken the form of currency or a new debt (eg a credit balance in another account); for the purposes of computing the gain, the value of the consideration was the value in sterling of the asset received obtained, where necessary, using the sterling exchange rate at the time of the disposal. When the asset obtained on the withdrawal from the bank was itself subsequently disposed of, the cost allowable in computing the gain or loss on that disposal was its value (expressed in sterling) at the time it was acquired ie at the time of the withdrawal from the bank account.

The general rule in TCGA92/S252(1) that a debt represented by a foreign currency bank account is a chargeable asset did not apply to a sum in an individual’s bank account representing foreign currency acquired by the holder for the personal expenditure outside the United Kingdom of the holder or the holder’s family or dependants, TCGA92/S252(2). This included expenditure on the provision or maintenance of any residence outside the United Kingdom. This provision was similar to TCGA92/S269 and the guidance at CG78315 applies to it also.