Is CGT payable on asset which is held abroad?

When you own assets abroad as a UK resident, you are required to pay Capital Gains Tax (CGT), which is calculated similarly to assets held in the UK. However, there are some important differences and considerations to keep in mind:

1. Unlike UK property, the 60-day reporting and tax payment rule does not apply to non-UK property. This means you have more time to report and pay any CGT due on foreign assets.
2. Currency conversion is crucial when calculating the gain; The purchase price needs to be converted to sterling using the foreign exchange rate on the date of purchase, while the sale price is converted using the rate on the date of sale. The capital gain is then calculated as the difference between these two sterling figures.

It’s important to note that the country where the asset is located usually has the primary right to tax the gain. This can lead to a situation of double taxation, a potential challenge that you should be aware of. To address this, the UK has a system called Foreign Tax Credit Relief (FTCR). If you’ve paid tax on the same gain in a foreign country, you can apply for FTCR to reduce your UK tax liability. Details about claiming FTCR can be found in the foreign notes section of the UK self-assessment tax return.

For UK inheritance tax purposes, there’s a provision for situations where a UK resident incurs a UK tax liability due to foreign assets, but those assets are inaccessible due to rules in the foreign country. In such cases, the UK tax is postponed until the assets become accessible. This principle also applies to unremittable income, as noted in the foreign notes section of the self-assessment return.

Given these complexities, especially regarding international tax considerations and relief claims, it’s not just advisable but empowering to seek professional tax advice when selling assets held abroad. This ensures compliance with all relevant tax laws in both the UK and the foreign jurisdiction and helps maximize any available reliefs or exemptions to minimize double taxation.