Question
I am French and bought some French bonds in 2003 using euros I had earned in France before coming to live in the UK in 2000. I am on an taxed on an 'arising' basis. I sold the bonds in Jan 2009 and wish to calculate my capital gains.
If I take the sterling value in 2003 and the sterling value in Jan 2009, there is a huge currency gain (because the euro strengthened) from which i didn't benefit as it was 'French' money. Were it not for that currrency gain I would not be taxable because the real capital gain is below the threshold taxable.
Can I legitimately avoid paying tax on the gains?Answer
Please bear in mind I’m not a tax specialist, so you may want to seek advice from an accountant, but based on my understanding of the tax rules I’m afraid you can’t avoid capital gains tax in this situation.
Under the arising basis you’re liable to UK tax on gains made overseas regardless of whether you bring the money into the UK. And although ‘qualifying’ corporate bonds are exempt from capital gains tax, bonds that are not denominated in sterling do not sadly qualify.
If you were instead taxed under the remittance basis then provided you are not UK domiciled (unlikely if you were born in France and intend to return there at some point) then you’ll normally only be liable to UK tax on gains if you bring them into the UK. However, you’ll also have to pay a £30,000 annual remittance charge unless the gains/income are below £2,000 or you haven’t been resident in the UK for at least seven out of the last nine years (in which case you’ll then lose your UK personal tax allowances).
Although you purchased the bonds with money originally earned in France, I don’t think this makes any difference in the eyes of HMRC. They’ll take the view that you were UK tax resident when you both purchased and sold the bonds, so you’re liable to capital gains tax.
For future reference, had you sold the bonds over two tax years (i.e. sold half by 5 April 2009 and the other half afterwards) you could have offset gains against two annual capital gains allowances, helping avoid tax.
Sorry my answer doesn’t contain any good news. If any readers have any bright ideas that could help ‘pisto’ please let us know below.
P.S. If you sold the bonds in January 2009, i.e. during the 2008/09 tax year, the tax return relating to this gain would have been by 31 January 2010.
I am French and bought some French bonds in 2003 using euros I had earned in France before coming to live in the UK in 2000. I am on an taxed on an 'arising' basis. I sold the bonds in Jan 2009 and wish to calculate my capital gains.
If I take the sterling value in 2003 and the sterling value in Jan 2009, there is a huge currency gain (because the euro strengthened) from which i didn't benefit as it was 'French' money. Were it not for that currrency gain I would not be taxable because the real capital gain is below the threshold taxable.
Can I legitimately avoid paying tax on the gains?Answer
Please bear in mind I’m not a tax specialist, so you may want to seek advice from an accountant, but based on my understanding of the tax rules I’m afraid you can’t avoid capital gains tax in this situation.
Under the arising basis you’re liable to UK tax on gains made overseas regardless of whether you bring the money into the UK. And although ‘qualifying’ corporate bonds are exempt from capital gains tax, bonds that are not denominated in sterling do not sadly qualify.
If you were instead taxed under the remittance basis then provided you are not UK domiciled (unlikely if you were born in France and intend to return there at some point) then you’ll normally only be liable to UK tax on gains if you bring them into the UK. However, you’ll also have to pay a £30,000 annual remittance charge unless the gains/income are below £2,000 or you haven’t been resident in the UK for at least seven out of the last nine years (in which case you’ll then lose your UK personal tax allowances).
Although you purchased the bonds with money originally earned in France, I don’t think this makes any difference in the eyes of HMRC. They’ll take the view that you were UK tax resident when you both purchased and sold the bonds, so you’re liable to capital gains tax.
For future reference, had you sold the bonds over two tax years (i.e. sold half by 5 April 2009 and the other half afterwards) you could have offset gains against two annual capital gains allowances, helping avoid tax.
Sorry my answer doesn’t contain any good news. If any readers have any bright ideas that could help ‘pisto’ please let us know below.
P.S. If you sold the bonds in January 2009, i.e. during the 2008/09 tax year, the tax return relating to this gain would have been by 31 January 2010.
Read this Q and A at http://www.candidmoney.com/questions/question235.aspx
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