Month: March 2024

Foreign gains under remittance basis

What happens when gain accrues in one year and is remitted in a later year

When will be the gain chargeable to UK tax?

A chargeable (i.e. taxable) gain is treated as accruing in any tax year in which any of the foreign chargeable gains are remitted to the United Kingdom (TCGA92 Sch1 1(2)).1

Will annual exemption limit available on capital gains remitted in a later year?

The annual exempt amount may not be deducted from chargeable gains to which paragraph 2 of Schedule 1 applies (foreign gains of non-UK domiciled individuals accruing in one year and remitted in later year). 2

Can I go back and change the tax return from arising basis to remittance basis and vice versa?

If a remittance basis claim is made within a return a request to revoke the claim can be made no later than 12 months from the statutory filing date i.e. within the amendment window.3

Alternatively, if you need to make a remittance basis claim it can be done within 4 years.4

You can read about foreign losses under remittance basis on this blog.

Source:

  1. CG25313
  2. TCGA92, Sec 1K (3)
  3. RDRM32020
  4. RDRM32030

Taxation of UK Mutual funds

A simplified guide to HMRC rules for individual investors.

The tax rules aim to put the investor broadly in the same position as if they had invested in the fund’s assets directly (rather than investing in the fund)2.

Income

Investors may receive dividend distributions and/or interest distributions3:

  1. Dividend distributions are treated in the same manner as any other UK company dividend.

  2. From 6th April 2017 interest distributions are paid gross and taxed in the same way as interest income from a bank4. 

In case of an accumulating fund (instead of distributing dividends or interests it re-invests them in the fund) amounts reinvested are taxed as income (dividend or interest) accruing to investors in the same way as if they had been distributed. Remember to deduct these on sale when computing capital gains tax5.

Disposal

A sale will give rise to capital gain6.

Units are treated as shares in a company and capital gains tax is computed in a similar way7.

Bonus

  • In India tax rates for equity and debt funds differ, its not the case in UK.

Source:

  1. Tolly Tax Guide: 37.27 to 37.28
  2. IFM01000
  3. IFM03110
  4. IFM03350
  5. IFM03120 and CG57707
  6. CG57680P
  7. CG57682 and CG57751.
  8. Detailed information given in Investment Funds Manual.
  9. To know about offshore/Indian Mutual funds [click]