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HMRC internal manual

International Manual

From
HM Revenue & Customs
Updated
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Description of double taxation agreements: Capital gains

Gains derived by a resident of one country from the disposal of immovable property in the other country can be taxed in that other country. Immovable property has the same meaning as it is given in the income from immovable property Article (see INTM153070). Additionally gains from the disposal of movable property which is part of the business property of a permanent establishment or fixed base which an enterprise of one country has in the other can be taxed in the country where the permanent establishment or fixed base is located.

Gains from the disposal of ships or aircraft operated in international traffic can only be taxed in the country where the operator is resident (or, in some agreements, in the country in which the effective management of the operator is situated).

Some agreements also provide that gains by a resident of one country from the disposal of shares in a property holding company in the other country can be taxed in that other country.

In most cases, all other gains are taxable only in the country of which the person making the gain is a resident. Some agreements, however, preserve the rights of one country to tax the gains accruing to a resident of the other country if that person had been a resident of the first country during a limited period (specified in the Article) before the disposal of the property.

Business International, Tax Treaty Team would like to see any case where an individual claims relief for capital losses in circumstances where a corresponding gain would be exempt from United Kingdom tax under the terms of a double taxation agreement. In the case of companies such losses are not allowable by virtue of TCGA92/S8(2).

As the guidance at INTM152060 reflects, the fact that an agreement allocates to the United Kingdom taxing rights in respect of particular gains does not enable the United Kingdom to tax those gains where no right to tax at all exists under United Kingdom domestic legislation.