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    • Melissah
    • By Melissah 16th Sep 17, 5:40 PM
    • 1Posts
    • 0Thanks
    Non-dom Remittance capital gain calc
    • #1
    • 16th Sep 17, 5:40 PM
    Non-dom Remittance capital gain calc 16th Sep 17 at 5:40 PM
    I purchased a property in 2005 in Aus.
    I did not arrive to UK until 2012 tax year.
    I use the remittance basis (final year)

    I don't owe tax, but need to report capital gain. Challenge is the GBP to AUD tax rate changed dramatically from 2005 (no impact to me I had never been to England till 2012). But if I calculate the gain and convert the cost base using 2005 rates, it creates a huge artificial profit when it's all Fx (almost no profit in aud)

    I cannot bring my capital gain here, which is find. But then when I consider what money I can bring over, am I allowed to bring everything except the AUD capital gain. Or do I have to leave behind a huge arbitrary sum because of the gbp aud spot rate in 2005 which had no impact on me?

    I really want to do the right thing, but I also have my life savings in aus and want to be able to buy my home here (leaving behind any true aud capital gain).

    There is a lack of info that I can see on this matter, so any help someone can give would be wonderful.
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    • Cook_County
    • By Cook_County 17th Sep 17, 5:47 PM
    • 2,927 Posts
    • 2,075 Thanks
    • #2
    • 17th Sep 17, 5:47 PM
    • #2
    • 17th Sep 17, 5:47 PM
    You can bring any money you want to the UK, so long as you pay UK CGT or income tax. The mixed fund rules are indeed complex.
    • sh1202
    • By sh1202 20th Sep 17, 1:24 PM
    • 24 Posts
    • 3 Thanks
    • #3
    • 20th Sep 17, 1:24 PM
    • #3
    • 20th Sep 17, 1:24 PM
    It sounds like you have a bank account containing (in GBP terms) clean capital (e.g. income or capital gains received before you became UK resident and originally used to fund the property purchase) along with currency gains that arose when you sold your property.

    There is only one way to calculate the capital gain, and that is by converting the sale proceeds into GBP using the FX rate at the date of sale, and converting the acquisition cost into GBP using the FX rate at the date of acquisition. There is no way around this and will in many cases lead to a large GBP gain despite there being little or no gain in the local currency.

    Anyway, you now have a mixed fund. Usually, you would need to remit the capital gain to the UK from this mixed fund before you could access the clean capital. Remitting the capital gain would give rise to a UK CGT liability (at the rate of 28% as this is a gain on residential property), whereas remitting the clean capital would not have any UK tax impact. It does not matter if you remit the gain in the current tax year, when you are taxed as a remittance basis user, or the next tax year, when you say you will pay tax on the arising basis. The tax effect would be the same if the gain was realised in a year when you paid tax on the remittance basis.

    Having said this, there is an opportunity between now and 6 April 2019 to 'cleanse' your mixed fund. This means separating the bank account into its constituent parts of clean capital and capital gains, and then choosing which part to remit. The legislation that governs this cleansing process is still going through parliament, so it is not yet certain how it will work, however, it will be more or less like this:

    1. Carry out an analysis of the account to see how much of the AUD balance is capital gains and how much is clean capital (and income, if any non-UK income has been paid into the account).

    2. Transfer an amount equivalent to the calculated clean capital into a separate offshore bank account (which has a nil balance prior to the transfer).

    3. Make a nomination in respect of that transfer to confirm that it was the clean capital that was transferred. It is not yet clear exactly how the nomination needs to be made but this should become clearer by perhaps mid November, once the legislation is finally passed.

    You should then be free to remit the clean capital and there should not be any UK tax effect.

    As previously mentioned, the rules surrounding mixed funds are very complicated and you should therefore seek professional advice to carry out the cleansing process. If a mistake is made in the calculations or the procedures surrounding the nomination, you may end up accidentally remitting capital gains rather than clean capital and, once remitted, there would be no way to avoid a UK tax liability. It is therefore imperative that you seek competent professional advice. In my experience, the cost of this would likely be between 750 and 2,000 for a relatively simple analysis, but this depends on the number of transactions and any other complicating factors. I assume that this would be less than the CGT liability so will most likely represent a significant tax saving.

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