CGT on gains generated outside UK

the_learner

Hi,

I am a foreigner citizen who is resident in UK for tax purposes. I will generate some P&L from investments I hold in my foreign bank account and the bank has been instructed not to retain any amount for tax. Now the question I have is how this is going to be treated by HMRC.
Assuming by April 2018 I make a capital gain of 500 (GBP equivalent). I will have to put that in my tax return I compile in January 2019 for the tax year 2017/18?
Will that capital gain generated outside the UK benefit from the CGT allowance?
The fact that my original country does not have such CGT exemption will it create any problem in getting that profit treated as tax free in UK?

Cook_County

Where are you domiciled? Are you paying UK tax on the arising or the remittance basis? Will these gains be taxed as offshore income gains or capital gains?

the_learner

I work and live in UK and those investments will generate capital gains but will not be taxed by my bank since I am not resident there. So I will have to declare to HMRC. Just wondering if that will still benefit from the CGT allowance here.

00ec25

the_learner wrote: »

I work and live in UK and those investments will generate capital gains but will not be taxed by my bank since I am not resident there. So I will have to declare to HMRC. Just wondering if that will still benefit from the CGT allowance here.

you have not understood the question

"domicile" is a very important concept as it decides in which country you are liable for tax

read this: https://www.gov.uk/tax-foreign-income/non-domiciled-residents

the_learner

Well, I have never formally changed my domicile so am I supposed to be still domiciled in my coutry of birth?
If so, I would not have to pay taxes in UK but I assume I have to pay there the taxes on those investments. Is that correct?

Cook_County

The UK has the primary right to charge tax unless you elect to claim the remittance basis. Making that election may increase or reduce your overall tax liability; depending on your circumstances.


You appear incidentally not to have understood the concept of "offshore income gains".

the_learner

Cook_County wrote: »

The UK has the primary right to charge tax unless you elect to claim the remittance basis. Making that election may increase or reduce your overall tax liability; depending on your circumstances.


You appear incidentally not to have understood the concept of "offshore income gains".

Yes I admit that I am not very familiar with this so apologies for the stupid questions. Your help is really appreciated.

Let's assume I am UK resident but non UK-domicilied.
I guess that in order to benefit from the CGT tax free allowance that UK offers (my country doesn't), my best choice is to get taxed by UK on the arising basis for all the capital gains I make in my country.
My bank, where those investments are held, is not going to retain part of the money to pay my tax bill in my country, so I assume that as lomg as I don't declare any capital gain there I will not be hit by double taxation.

What is your opinion about this? Thanks a lot for your help.

SuperHan

Are you sure that the other country won't want to charge CGT (or other similar tax) on the gain?


In a lot of cases you would see both the UK and the overseas territory trying to tax the gain of a UK resident in an overseas territory.


You would then look to a double tax treaty to see who has the right to tax this gain (it's usually the country where it arises rather than the country where you are resident).


In the absence of a treaty, you would pay tax in both countries but look to claim double tax relief in one (usually the one with the lower rate).


If you are confident the income is not taxable in the other country, then you can just report it on your UK tax return and claim the annual exemption (assuming you are entitled to it - as a resident on the arising basis, you should be).

the_learner

SuperHan wrote: »

Are you sure that the other country won't want to charge CGT (or other similar tax) on the gain?


In a lot of cases you would see both the UK and the overseas territory trying to tax the gain of a UK resident in an overseas territory.


You would then look to a double tax treaty to see who has the right to tax this gain (it's usually the country where it arises rather than the country where you are resident).


In the absence of a treaty, you would pay tax in both countries but look to claim double tax relief in one (usually the one with the lower rate).


If you are confident the income is not taxable in the other country, then you can just report it on your UK tax return and claim the annual exemption (assuming you are entitled to it - as a resident on the arising basis, you should be).

Hi,

The bank there asked me to sign the "tax exemption application form for non-residents" which I assume is giving me the right to get tax exemption in that country but also the obligation to report any gain in UK.

SuperHan

I don't know about the other territory, but here banks aren't generally in the game to give proper tax advice.

It may be that they give you the form as standard for you to fill out on the basis you know your circumstances and the tax implications. The bank giving you the form may not indicate that you are definitely not liable for tax overseas.