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HMRC internal manual

International Manual

UK residents with foreign income or gains: capital gains tax: Gain taxed UK/abroad

In determining whether UK tax is computed by reference to the same gain on which the foreign tax is charged, there is no necessity that the respective tax liabilities should arise at the same time or that they should be charged on the same person. Thus, the same gain is regarded as taxed both overseas and in the UK where, for example:

  • overseas tax is payable on a no gains/no loss disposal within a UK group of companies and liability to UK tax arises on the subsequent disposal of the asset taking in the uplift in value to the date of the first disposal under TCGA92/S171
  • where an overseas trade carried on through a UK branch or agency is transferred to a local subsidiary the gain on the related disposal of the chargeable assets may immediately be crystallised for local tax purposes but deferred under TCGA92/S140 until the shares in the local subsidiary are sold (or the subsidiary disposes of the assets within six years) thus giving rise at that point to a gain chargeable to UK tax computed in whole or in part by reference to the earlier uplift in value
  • overseas tax is payable by reference to increases in the value of assets although there has been no disposal and there is a subsequent disposal attracting UK liability
  • overseas tax is payable in its country of residence by a non-resident company on the disposal of an asset and in the UK the gain is charged on a UK resident individual under TCGA92/S13 (see INTM169060).

In each case, the amount of relief may need to be restricted under the rules set out in INTM169100 onwards.

Where, by contrast, it is not possible to identify the gain subject to overseas tax with that on which UK liability arises, no credit relief is due. Thus, where overseas tax is charged on a disposal covered by rollover relief under TCGA92/S152 and liability to UK tax arises on the disposal of the replacement asset, the gain on that disposal cannot be identified with the gain on the earlier disposal and no credit relief is due. A deduction for the overseas tax may, however, be allowed under TIOPA10/S113 (INTM169090) in computing the gain for rollover purposes.

See Statement of Practice SP6/88 issued on 4 November 1988, which can be accessed on the HMRC internet site.