How to Treat Capital Gains on U.S. ETFs in the U.K. and then U.S.

Hi,

Sorry if this was covered in a different thread. When I started reading the threads on cgt my eyes started rolling back into my head.

I'm wondering if someone might have been in the following scenario and might offer me some tips. I have some shares in U.S. ETFs that I'm cashing out and need to pay...someone taxes for.

Do I understand correctly that I will first pay the U.K. capital gains tax since I'm resident here now and then file with the U.S. and use 1116 to get a credit on that?

Thanks in advance.

Firstly, are your ETFs HMRC reporting funds?

Look here to find out.

http://www.hmrc.gov.uk/collective/rep-funds.xls

Then tell us how you are taxed by HMRC, ie are you taxed on your worldwide income on an arising basis?

I have 2 ETFs...one is on that list and one is not. I also own options on the ETF found on that list. Would options on ETFs work the same way?

I don't have any other income besides this and this would be my first return filed in the U.K. so I guess I'm not sure how to answer your second question.

I have 2 ETFs...one is on that list and one is not. I also own options on the ETF found on that list. Would options on ETFs work the same way?

I don't have any other income besides this and this would be my first return filed in the U.K. so I guess I'm not sure how to answer your second question.

You may be able to claim the "remittance basis" and so pay no UK tax on your US capital gains. If this is the case it won't matter that one of your funds is non-reporting.

Read this to determine your residency status and then look at Section 5. Use the flow charts to determine your residency and then see if you qualify for the remittance basis.

http://www.hmrc.gov.uk/cnr/hmrc6.pdf

Thank you for your help. I'll have a read.

Ok...so the remittance basis covers only when I bring the U.S. money into the U.K. right? Is that when I move it from my U.S. broker to my U.K. bank account or when I actually spend it in the U.K. no matter where in the world the funds are sitting at the time?

Also, you mentioned remittance basis meaning that I wouldn't have to pay tax in the U.K. Is that due to UK Foreign Tax Credit?  http://www.hmrc.gov.uk/helpsheets/hs261.pdf [nofollow]

or because I wouldn't have to pay if I left my U.S. money in the U.S.? I actually intend to use some of it here in the U.K. which is why I ask.

Thank you again.

Looks like I answered my first question...for those other folks reading this thread...both would be considered "bringing money into the U.K." since any indirect or direct method counts.

Looks like I answered my first question...for those other folks reading this thread...both would be considered "bringing money into the U.K." since any indirect or direct method counts.

Remember if the amount of your foreign gains are small you may also be able to exclude them from UK tax.

Section 5 of the HMRC document covers this.