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ACCA Strategic Professional · Advanced Taxation (UK) · Capital gains tax: the scope of the taxation of capital gains

Helen, an individual, is UK resident and sells an overseas investment property for a gain of £50,000 after deducting costs. She has no other gains, and she is a higher rate taxpayer. Foreign tax of £6,000 was paid on the gain. Using the annual exempt amount and rates in the tax tables, what is her UK CGT liability after double tax relief, assuming relief is the lower of foreign tax and UK tax?

The UK CGT payable is £5,280. The gain after the £3,000 annual exempt amount is £47,000, taxed at 24% to give £11,280. Double tax relief is the lower of UK and foreign tax, here £6,000, which leaves £5,280 to pay.

  1. A£5,280Correct
  2. B£6,000
  3. C£6,000 with a refund of the excess foreign tax
  4. D£0 because foreign tax paid exceeds UK tax

Explanation

Taxable gain is £50,000 - £3,000 = £47,000. Residential property gains are taxed at the higher rate of 24% for a higher rate taxpayer, so UK tax is £11,280. Relief is limited to the lower figure, the foreign tax of £6,000, so UK tax payable is £11,280 - £6,000 = £5,280. Option B is wrong because it equals the foreign tax, not the remaining UK tax.

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