Currency exchange on clean capital in foreign currency to Sterling

Dear HMRC, I have a question regarding currency exchange on clean capital from foreign currency to Sterling. I moved to the UK in October 2022 from Hong Kong with a BNO visa. It appears that I was not a UK tax resident in the year 2021/2022, but I will be a UK tax resident in 2022/2023. Before I moved to the UK, I had saved around HKD 800,000 in an HSBC UK overseas account. After I moved to the UK, I transferred all of my Hong Kong dollars back to Hong Kong in order to find a better exchange rate to convert HKD 800,000 to Sterling. My question is, do I need to pay any tax on this exchanged money when I transfer it back to the UK? Additionally, do I need to provide any proof to demonstrate that this exchanged money is clean capital? Thank you for your assistance. Thank you

Hi,

CG78300 advises that currency other than sterling, is a chargable asset and its disposal can give rise to a chargeable gain or an allowable loss. 

CG78300 - Foreign currency: introduction

If you make a gain from converting from GBP to HKD and back again, then the gain, minus expenses, is chargeable to Capital Gains Tax.

Thank you.

Thanks, so what documents should I prepare to prove the gain or loss or expense?

It's not clear to me how there is a gain involved if this money is only being converted for the first time from HKD to GBP. You've simply moved the money in its same currency, in order to utilise a conversion spread fee that is far better than those provided by HSBC, which I suspect would be in the order of 2%! Various currency exchange companies will charge as low as between 0.15% and 0.25%. I'm guessing this was your plan. If you're converting back and forth, converting into HKG when the GBP is strong, then converting back when the GBP is weak, then this is Forex trading and obviously taxable at the point where you realise the gains into GBP. Basically treated like stocks and shares. What you've described in the post doesn't match this & simply has a few incidental fees involved.

Hi Alfred Chan,

You can provide a spreadsheet with the details.

Thank you.

Hi Damion Yates,

Where currency exchanges are being used for the purpose of making a gain from the original exchange, as the exchange rates fluctuate, the gain is taxable. For example HKD to GBP to HKD to GBP to HKD. Where you exchange once for example to prepare to move the capital to a UK bank would not be taxable.

Thank you.

Hi HMRC Admin, I have reviewed the Gov.UK guidance on capital gain and foreign currency and the forums, but still cannot find the answer. Hope you can help to provide the answer to my case. I am the tax resident in 2022/2023. My case is, in August and September 2022, I exchanged GBP to USD 10 times through stock broker. The exchange rates were different each time. The total amount was GBP10000 exchanged USD12478. Then I used all USD to invest on stock. In November 2022, I sold part of the stock and USD4000 exchanged back to GBP. In this case, besides I have to declare the Capital gain from the stock, do I need to declare any profit/loss on the currency exchange for exchanged USD4000 back to GBP? If yes, which exchange rates should I use for the original exchange when calculate the profit/loss? Use first in first out concept on that 10 exchanges? Or using the average rate from that 10 exchanges? Or using the monthly rate /annual average exchange rate from HMRC? Thank you for your help! ACTS

Hi,

Please refer to guidance at:

CG78300 - Foreign currency

For the exchange rate you can use any of the spot rates for the tax year the exchage took place.

Exchange rates from HMRC in CSV and XML format

Thank you.

Hi HMRC Admin, Thank you for the link (CG78300). Could you please further help on advising which section(s) within that link I could find the relevant information? I tried to read the sections under CG78300P, but still cannot find relevant information or examples. Many thanks ACTS

Hi ACTS,

For self assessment purposes, HMRC does not impose on an individual, how they should convert an overseas currency to pounds sterling.  
For your convenience, you can use the the various customs and vat table of exchange rates, which can be found at: Exchange rates from HMRC in CSV and XML format
or from other sources, such as the London stock exchange or the rates published in a newspaper etc.

Thank you.

Hi HRMC Admin, According to “CG78300 - Foreign currency: introduction”, it is stated that “Foreign currency bank accounts can also give rise to chargeable gains or allowable losses for periods up to 5 April 2012, see CG78320 onwards.” According to “CG78320 - Foreign currency: foreign currency bank accounts – introduction” and “CG78321 - Foreign currency: foreign currency bank accounts - periods from 6 April 2012”, it is stated that: “From 6 April 2012 the treatment of foreign currency bank accounts was significantly simplified. From that date the treatment of foreign currency bank accounts for individuals, trustees and personal representatives (including members of a partnership) were aligned with the treatment of ‘simple debts’. ‘Simple debts’ will not give rise to chargeable gains (or allowable losses) in the hands of the original creditor.” Following the above question from Alfred Chan, would you please clarify the foreign currency bank accounts in his case are ‘simple debts’ (instead of an ‘asset’, as his case happened after 2012) and therefore should not give rise to chargeable gains, even if currency exchanges take place in the above-mentioned foreign currency bank accounts.

Hi,

Foreign currency bank accounts for individuals, trustess and personal representatives, were simplified after 5 April 2012 and are no longer subject to capital gains. They can no longer claim allowable losses.

Thank you.