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HMRC internal manual

International Manual

HM Revenue & Customs
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UK residents with foreign income or gains: capital gains tax: Amount of foreign tax credit relief: losses

Where foreign tax credit relief is due, allowable capital losses should be utilised in such a way as to reduce the taxable amount of a gain down to a level where the UK tax due on the gain equals the foreign tax paid, and then allocate the remaining part of the loss to another gain, and so on.

Where gains are subject to differing rates of UK capital gains tax, it would be in the customer’s interest to offset the capital losses against those gains where, following any claim for a foreign tax credit, there remains a liability to UK capital gains tax by sorting the gains in descending order of UK tax rates applicable to those gains and applying the allowable losses firstly against those gains where the highest UK tax rate is applicable. This should secure the maximum amount of foreign tax credit relief, while at the same time ensuring that the losses reduce the amount of gains which are subject to the highest UK tax rates, thus minimising the overall tax charge.