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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Foreign currency: example

Day 1 US$2.40 to £1X borrows US$100,000 (=£41,667)
Day 8 US$2.30 to £1X buys shares for US$100,000 (=£43,479)
Day 360 US$2.00 to £1X sells shares for US$100,000 (=£50,000)
Day 365 US$1.90 to £1 X repays loan US$100,000 (=£52,631)

The chargeable gain on the disposal of shares is computed as follows -

Day 360 Disposal proceeds (in sterling terms) 50,000
Day 8 Acquisition cost (in sterling terms) 43,479
Chargeable gain subject to indexation  6,521 

The chargeable gains in respect of foreign currency are computed as follows -

(i) Day 8 Disposal proceeds (in sterling terms)   43,479
  Day 1 Acquisition cost (in sterling terms)   41,667
      Chargeable gain 1,812 
(ii) Day 365 Disposal proceeds (in sterling terms)   52,631
  Day 360 Acquisition cost (in sterling terms)   50,000
      Chargeable gain 2,631

No relief is due for the `loss’ in sterling terms on repaying the loan (repaid £52,631 - borrowed £41,667 = `loss’ £10,964).

NOTE. If a taxpayer is within the charge to Capital Gains Tax, neither indexation allowance nor taper relief apply to disposals of assets on or after 6 April 2008. Previously indexation allowance had been frozen at April 1998. For indexation allowance see CG17207+ and for taper relief see CG17895+.