Hello
Guest

Sponsored Links


Topic: Calculating remitted gain from the proceeds from selling a non-reporting fund  (Read 627 times)

0 Members and 1 Guest are viewing this topic.

  • *
  • Posts: 6

  • Liked: 0
  • Joined: Oct 2011
  • Location: London
When I came to the UK I had a small amount still invested in the US in what turned out to be a non-reporting fund. I have claimed remittance basis as any income (dividends, CG distributions) have much less than £2000. However now I need the money in the UK, and it seems a bit confusing how to handle the exchange rate fluctuations when calculating what I owe HMRC now that I have remitted the funds.

It appears that the gain at disposal is calculated in GBP terms the same way as a normal capital gain (at least according to https://www.cii.co.uk/knowledge/life-pensions/articles/my-pfs-technical-news-21062016/42277 [nofollow] ), but then the gain is placed in the "relevant foreign income" pool of a mixed pool for remittance purposes (https://www.gov.uk/hmrc-internal-manuals/offshore-funds-manual/ofm15500 [nofollow] ), which is tracked in local currency until the date of remittance.

I know things can get very complicated for people with complex investments so I came up with an example with simple numbers that is closer to my circumstances:

Date A:
   • Exchange rate: $2.00/£
   • Start with Clean capital: $20k  (£10k)
   • Purchase $20k (£10k) of shares a non-reporting fund
Date B:
   • Exchange rate $1.50/£
   • Sell the non-reporting fund shares for $30k ($20k) and place the proceeds in an empty foreign bank account (which becomes a mixed fund at this point)
   • As OIG due to disposal of non-reporting funds, like CG, is calculated using GBP spot rates at time of purchase and sale, thus the resulting OIG is:  £20k - £10k = £10k, which equates to $15k at on the date of disposal
   • The mixed fund thus contains $30k, composed of a pool $15k of "relevant foreign income", and $15k of clean capital
Date C:
   • Exchange rate $1.20/£
   • Remit the entire $30k from the foreign bank account to the UK
   • The remittance of £25k is composed of £12.5k of  "relevant foreign income", which is taxable as income, and £12.5k of clean capital

It seems slightly strange to calculate the foreign gain in GBP and then convert it back to USD only to convert it a third time at remittance,  so I'm wondering if anyone who has been in a similar situation could let me know if I'm on the right track? 

Thanks!


  • *
  • Posts: 3902

  • Liked: 716
  • Joined: Nov 2012
  • Location: Eee, bah gum.
Above my pay grade, but I am interested in hearing the answer even though I pay taxes on an arising basis.
Dual USC/UKC living in the UK since May 2016


Sponsored Links





 

coloured_drab