Foreign capital losses – remittance basis
Remittance basis is basically a deferral of UK tax. If foreign income and gains remain offshore and are never regarded as remitted to the UK, the tax charge is effectively deferred indefinitely.[RDRM31030]
Foreign income or gains not covered by remittance basis
Gains under a policy of life assurance are always taxable on the full amount on the arising basis, irrespective of your domicile or residency status.[RDRM31110]
Foreign capital losses election
Non-domiciled remittance basis users are required to make an election under TCGA1992/s16ZA if they want their overseas losses to be offset against foreign chargeable gains.
The election should be made for the first year for which the remittance basis is claimed, irrespective of whether the individual has any foreign chargeable gains or overseas losses in that year. The election will usually be expected to be made within the white space in the Capital Gains supplementary pages of the same SA Return as the first remittance basis claim is made. The election is irrevocable.
The usual time limits for claims/elections at TMA70/s42 and 43 apply.
If the individual does not make an election, relief cannot be allowed in respect of any foreign losses accruing to them in that year, or any future tax year in which they remain not domiciled in the United Kingdom (whether or not they claim or use the remittance basis in those later years).[RDRM31170]
Capital Gains Manual
Rules for foreign capital losses for remittance basis users are given in 5 pages from CG25330 to CG25330D.
CG25330D contains an example, I made an Excel sheet to demonstrate it better.
Main point to remember is:
Effect of the election is that losses (UK and foreign) are first adjusted against foreign gains not remitted (thus not taxable) before UK taxable gains. This will make tax payer pay higher taxes if their UK losses are adjusted against their foreign gains which they do not plan to remit to the UK.
Thus, it is important to make the capital Gains election in the first year of making remittance basis claim and secondly it may not be always beneficial to make this claim.
Roy Accountants 