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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

HM Revenue & Customs
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Remittance Basis: Identifying Remittances: Specific Topics: Foreign Currency Bank Accounts

When currency is deposited in a foreign currency bank account there is, for Capital Gains Tax purposes, a disposal of the currency for its sterling value at that time. The deposit establishes a debt due by the bank to the depositor.

Apart from the debt on a security a pound sterling debt is not usually chargeable asset in the hands of the original creditor.

However a debt which is not in pound sterling and which represents a credit balance in a bank account is a chargeable asset; for capital gains purposes. The location of the account is irrelevant; the rules apply to any non-sterling debt, that is, to any foreign currency account. The ‘acquisition cost of the chargeable asset is the value, in sterling, of the ‘debt’ acquired, that is in layman’s terms, the sterling value of the deposit into the bank account. Each withdrawal from the currency account is a (part) disposal of the debt for the sterling value of the currency obtained. The currency obtained on the withdrawal from the bank is usually equal to the ‘disposal proceeds’, the value being the sterling amount of the date of disposal.

Foreign currency accounts held by UK Residents

Foreign currency accounts (debts receivable) held by UK residents who are domiciled within the UK are regarded as UK-situs assets, even if the account is actually maintained offshore (TCGA92/s275(1)(c)).

The situs of foreign currency accounts that are held by UK residents who are not domiciled within the UK are regarded as situated in the UK only if the account is maintained at a UK branch of the bank. Otherwise, the account is regarded as situated offshore.

There are particular rules that apply to foreign exchange gains or losses arising on foreign currency accounts that contain an individual’s relevant foreign earnings or relevant foreign income. Further details on computing such gains and losses can be found in the Capital Gains Manual. A technical note on this issue was published on 16 December 2009, and is available on our website.