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Posted Wed, 03 Apr 2024 19:01:23 GMT by igys
I am receiving restricted stock units (RSUs) from my employer. Some of them have been granted in the UK but vested when I was a tax resident of Switzerland (which I was for about two years, I have since returned to the UK). As such, they have been subject to income tax in Switzerland on the apportionment basis. I haven't immediately sold the stock, instead I allowed it to grow a bit, before selling it later (while being UK resident). Let's call vest value V, UK-portion A, and sell price S. As per, I am considering only the UK-taxed part (V*A) as the cost basis for calculation of capital gains (S - VA). My question relates to how to calculate the foreign tax credit relief. The guidance says to consider "lower of the foreign tax paid and UK tax liability". 1. When calculating the "foreign tax paid", should I calculate it using the marginal, or average tax rate? The total tax paid in Switzerland corresponds to the whole income, not only RSUs. 2. When calculating the UK tax liability, should I consider the whole gain to be taxed right now (S - VA), or only the portion corresponding to the foreign vest event (V - VA), as Switzerland only taxed based on the vest value and never considered later growth and sale at price S? Fwiw, I am not subject to temporary non-residence rules.
Posted Mon, 15 Apr 2024 09:36:09 GMT by HMRC Admin 32

Q1. Re the Foreign Tax Credit Relief.  you should use whichever exchange rate is beneficial to you.  
Q2. Re the CG. When you left and returned to the UK can have a bearing on this.  
Please refer  to below for more information on their CG liability where residence is concerned.

CG25000C - Capital Gains manual: individuals: effects of residence, ordinary residence and domicile

Thank you.
Posted Mon, 15 Apr 2024 09:42:37 GMT by igys
Thank you for your message. Unfortunately, neither your message nor the link answers my questions: Q1 relates to the tax rate in Switzerland not the currency exchange rate and Q2 is related to foreign tax credit relief for capital gain, not the "base" capital gains calculation. Would you be able to address them?
Posted Mon, 22 Apr 2024 16:02:26 GMT by HMRC Admin 19
  1. You would need to know the amount of tax that relates to the RSU and work it out from there.  
  2. As per our original reply.
Thank you.
Posted Mon, 22 Apr 2024 16:21:24 GMT by igys
Thank you for the message. Unfortunately, it's a bit unclear for me how it addresses the question. Let me give you concrete numbers to rephrase the question again (happy to dig out the actual ones but once the principle is established I'll be able to take it from there). 1. I earned an equivalent of 200k GPB in Switzerland in 2021. Out of this, 150k corresponds to the "regular income" whereas 50k corresponds to RSU (which, similarly to the UK, is taxed together with the regular income). I paid 40k tax on this, ie. average tax rate 20%. Had I earned only 150k (regular income but no RSU), I would have been taxed 20k (ie. 30%) due to tax progression. Is the foreign tax paid on RSU 20k (ie. 40k - 20k) (which as per HS263 is how UK tax liability is calculated) or 20% * 50k = 10k? 2. Would you be able to point where in the manual I can find information about the foreign tax credit relief as I wasn't able to find it there? I know how to calculate the regular (full) UK tax for the sale event, but it's not clear to me whether I am entitled to consider the whole gain (S - VA) as UK tax liability for the purposes of foreign tax credit relief, where a portion of this gain (S - V) has nothing to do with the foreign tax. Do I understand your message correctly that the answer to this is: yes, I should consider the whole gain to be taxable now, independently how / when it arose?
Posted Mon, 29 Apr 2024 14:44:59 GMT by HMRC Admin 5
Hi igys

1. the amount depends on when the level of income actually falls into the higher tax bracket. if the change is at 150k then you will take all the 50k at the higher tax rate.    
2. yes

Thank you
Posted Mon, 29 Apr 2024 20:53:42 GMT by igys
Thank you for the answers. For 1, can you confirm that we are talking about Swiss tax (ie. calculating "foreign tax paid")? The tax progression there is smoother than in the UK; there is no "higher tax bracket". Do I understand your answer correctly as to say that to calculate "foreign tax paid" I should use the "marginal" tax rate, ie. use the tax rate for the 199k-200k tax rate for the last 1k, 198k-199k tax rate for the previous 1k, etc?
Posted Fri, 03 May 2024 14:59:38 GMT by HMRC Admin 25
Hi igys,
You are claiming relief for the swiss tax paid.
Guidance on how to work it out is here:
Relief for foreign tax paid (Self Assessment helpsheet HS263)
Thank you. 
Posted Fri, 03 May 2024 15:05:03 GMT by igys
Yes, as I mentioned before, the question is about how to calculate the amount of "foreign tax paid" mentioned in the helpsheet you referred to. I found no guidance that would answer my question there.
Posted Mon, 13 May 2024 10:32:48 GMT by HMRC Admin 10
You will need to contact HMRCdirect to discuss further on 0300 200 3310.

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