Capital Losses Print

Prior to 6 April 2008 capital gains on overseas assets held by non-domiciliaries were taxed on the remittance basis. Losses arising on the disposal of such assets could not be claimed. The remittance basis applied in respect of capital gains regardless of whether it was claimed for income tax purposes.

Since 6 April 2008 a non-domiciled individual may claim CGT loss relief in the following circumstances:

Where the individual has not previously claimed to be taxed on the remittance basis; or

Where the remittance basis is first claimed, the individual is entitled to make an irrevocable election into a new regime, which entitles him to CGT loss relief against gains of the same year. The losses, which include both UK, and offshore losses, are set off in the following order:

Foreign gains which are remitted to the UK in that year;

Unremitted foreign gains of that year;

UK source gains of that year.

If there are surplus losses for the year, they are carried forward for offset against the next available gains.

A further point to note is where the remittance basis has been claimed and a gain from a prior year, say 2016/17 is remitted to the UK in a later year, say 2021/22 the gain is treated as arising in the year of remittance. However, losses of the intervening years, in this example 2017/18 onwards, cannot be offset against the remitted gain.

Once a loss election has been made, the above order of set-off applies for all years for which a claim for the remittance basis is made, or the remittance basis applies without a claim. For a year in which the remittance basis does not apply, then it seems that the losses are offset against the chargeable gains of that year, in the normal way. It should be noted that the availability of losses only applies where the loss election has been made.

Where the remittance basis has been claimed for the first time for 2008/09 or a later year, and a loss election is not made, then offshore losses cannot be claimed for that year, or any later year, whether or not the remittance basis is claimed, until such time as the non-domicile becomes deemed domiciled in the UK for income tax and CGT purposes. (See section on Long-Term Residents.)

Where the remittance basis is claimed and a gain from a prior year, say 2014/15 is remitted to the UK in a later year, say 2019/20 the gain is treated as arising in the year of remittance. However, losses of later years, in this example 2014516 onwards, cannot be offset against the remitted gain.

It is probably impossible to know whether making the election will be beneficial at the time it has to be made, but if most investments are in the UK then it is more likely to be inadvisable to make the election. Conversely if most chargeable assets are situated outside the UK, the election may be beneficial.

Although the election must apply for the first year in which the remittance basis is claimed, the time limit for making the election does not expire until 4 years after the end of the year for which the election is made. So, if the remittance basis was claimed for the first time for the year 2015/16 the deadline for making the election is 5 April 2020. According to the Tax Return Guidance Notes, the election may be made in the “white space” of the tax return.

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