Investment Income/capital gains tax questions

I have some of my retirement income coming from after tax investments (Vanguard), and I've been trying to understand the complexities. (I'm dual UK/US citizen, moving back to the UK in April.)

I think I need to move my US Vanguard mutual funds into EFTs that are HMRC reporting. If I don't I'll get a tax penalty for offshore accounts. Is that right?

I was expecting to calculate USD capital gains on my Vanguard fund, then convert that gain to GBP. However, I'm reading that I might need to convert each purchase to GBP, then convert the sales price to GBP, then work out the GBP capital gains independently. Is that right?

What else might I have missed?

Thanks, Jonathan

What you say is quite correct.

The year before we moved back we converted our taxable Vanguard mutual funds to ETFs. If there is a direct equivalent then there is no capital gains to pay for the conversions.

Once back in the UK the dividends from equity (stock) ETFs are given the favorable tax treatment of dividends. When you sell shares you need to calculate the cost of the shares when purchased in £s and also in £s on the date they are sold. XE.com holds historic exchange rate tables but I expect there are other sources of historic rates you can use.

Many Thanks! As always, your experience and insight is appreciated.

I finally found this on the HMRC web site that confirms this. It's going to be a pain, as I've put into the account twice a month for a long time, so re-calculating the cost basis will be tedious.


From https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg78310

You should not accept a contention that the gain or loss on an asset acquired and disposed of for foreign currency should itself be computed in foreign currency and then converted into sterling at the rate ruling at the time of the disposal of the asset. The decision in Bentley v Pike, 53TC590, that the capital gains computation had to be worked in sterling was confirmed in the case of Capcount Trading v Evans, 65TC545.

BTW, HMRC publishes exchange rates to use, such as - https://www.gov.uk/government/publications/hmrc-exchange-rates-for-2020-monthly

One is required to create a Section 104 share pool, using spot daily rates for each transaction. HMRC do not publish daily exchange rates, but any reasonable source can be used.