ACCA ATX UK Syllabus A2. Chargeable gains - Double tax relief - Notes
Sale of foreign located assets
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:
Overseas tax suffered
UK tax on that gain
Illustration
Frances Bond is resident and domiciled in the UK.
During 2023/24 he earns £50,000. He has a residential property in Spain which he sells in October 2023 for £80,000, incurring Spanish taxes of £8,000.
This is his only gain of 2023/24.
He had bought the villa in June 1998 for £25,000, and uses it only for holidays
Calculate the capital gains tax liability in 2023/24.
Solution
CGT payable on disposal of the villa in Spain
Disposal of the villa 2023/24
Sale proceeds £80,000
Less: Cost (£25,000)
Capital gain £55,000
Less: Annual exempt amount (£6,000)
Taxable gain £49,000Capital gains tax 28% x £49,000 = £13,720
Less:DTR Lower of:
(1) Foreign tax suffered (£8,000)
(2) UK CGT on the villaCGT payable £5,720