HMRC have issued new guidance regarding the remittance basis of taxation and foreign currency bank accounts. In particular it relates to the calculation of gains and losses arising on transfers between sterling and non-sterling bank accounts. The guidance is in response to concerns being expressed regarding the fact that those who choose to be taxed on the remittance basis will no longer qualify for the Annual Exempt Amount (AEA) for Capital Gains Tax (CGT).

The fact that choosing to be taxed on the remittance basis affects the AEA is causing administrative difficulties in completing Self Assessment returns because of the need to establish the gains and losses which arise on movements from overseas bank accounts held in currencies other than sterling. Such amounts are chargeable assets for the purposes of CGT and any transfers between them create a potentially taxable disposal. It can be difficult to calculate the base cost in situations where it cannot be ascertained which exchange rate was in force at the time the debt was acquired or increased.

To address these concerns HMRC have announced its plans to minimise such difficulties and their guidance note sets out a simplified approach to determining the acquisition costs of a non-sterling bank account, to calculating the gains and losses and to dealing with the compliance burden.

The full text of the guidance can be accessed below at 2.07.