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HMRC internal manual

International Manual

UK residents with foreign income or gains: capital gains tax Resident shareholders in non-resident companies: TCGA92/S13

This Section enables the UK, in certain circumstances, to tax a UK resident in respect of gains made by a non-resident company in which he is a shareholder (participator where the gains accrue on or after 28 November 1995 - FA96/S174) (see CG57200 onwards). However the Capital Gains Articles in double taxation agreements may override it.

If the non-resident company disposes of immovable property; for example, land, buildings etc, in the UK, double taxation agreements normally provide that any gain can be taxed in UK. Although UK domestic law may prevent a capital gains tax charge on the non-resident company (see TCGA92/S10), TCGA92/S13 can be applied to tax the UK resident shareholder.

If the asset disposed of is not immovable property in the UK; for example, immovable property situated outside the UK, shares etc, then the Capital Gains Article will normally prevent a charge to tax under TCGA92/S13 being made on the shareholder.

The text of the Capital Gains Article in the agreement with the country concerned will need to be examined to see whether there are any variations from the general principles outlined above.

See Statement of Practice D23, available on the HMRC internet site, where liability arises under TCGA92/S13 and the non-resident company pays overseas tax on its gains in the country where it is resident.