ACCA ATX ^UK Syllabus A2. Chargeable gains - Double tax relief - Notes ^{3 / 6}

Double tax relief (Foreign gains)

If you are UK resident, you will pay UK CGT on your worldwide gains. 
However, if you have a property located outside of the UK – if you sell it, you will have to pay CGT in the country of sale and in the UK. 
This means, that you are paying tax two times on the same capital gain.
The government offers relief for this in the form of double tax relief.

Double tax relief

Double tax relief is available to offset any double tax suffered on assets disposed of abroad.

The DTR given is the lower of:

1. Overseas tax suffered

2. UK tax on that gain

Illustration

Frances Bond is resident and domiciled in the UK. 

During 2024/25 he earns £50,000. He has a residential property in Spain which he sells in October 2024 for £80,000, incurring Spanish taxes of £8,000. 

This is his only gain of 2024/25. 

He had bought the villa in June 1998 for £25,000, and uses it only for holidays 

Calculate the capital gains tax liability in 2024/25.

• Solution

  CGT payable on disposal of the villa in Spain 

  Disposal of the villa 2024/25 
  Sale proceeds £80,000
  Less: Cost (£25,000)
  Capital gain £55,000
  Less: Annual exempt amount (£3,000)
  Taxable gain £52,000

  Capital gains tax 24% x £52,000 = £12,480
  Less: 

  DTR Lower of: 
  (1) Foreign tax suffered (£8,000)
  (2) UK CGT on the villa 

  CGT payable £4,480