igys

I have two units of stock of the same company in the S104 pool. Both of them were acquired for £100 but one of them was charged foreign tax of £20 on acquisition. I sold one of the units for £200, generating £100 of capital gains (I have other capital gains and income that brings me above the 20% capital gains threshold). Capital gains tax to pay is £20. For the purposes of calculating the foreign tax credit relief, should I: a) apportion the foreign tax based on the total number of shares that were subject to foreign tax, leading to £10 FTCR and £10 remaining foreign tax to claim once I sell the other unit, or b) consider the full foreign tax paid already, leading to £20 FTCR already ?

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.

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?

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?

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?

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 https://www.gov.uk/hmrc-internal-manuals/employment-related-securities/ersm163130, 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.

Thank you for your message. Do I understand correctly, that when the unconditional contract rules apply, the capital gains should still be calculated and reported within the same-day pool (taking into account the difference between sale value at transfer and the fair market value at vest)?

Thank you for clearing that up. My doubt regarding conditional/unconditional contracts came from the fact (as per the above) that the contract to sell is effectively binding already 60 days before vest (conditional on the vest happening). Do I understand correctly, that when the unconditional contract rules apply, the capital gains should still be calculated and reported within the pool (taking into account the difference between sale value at transfer and the fair market value at vest)?

Thank you for the message. Would you be able to advise wrt. the answer to my question, though? It related to how, if at all, to report capital gains resulting from the sale originating from the ETP program, described above. Unfortunately, for various reasons, the suggestions in your post are not applicable here.

My employer gives RSU as part of income. They have a program, called ETP, working as follows: 1. you sign up for automatic sale of stock during a fixed enrollment period 2. after 70 days, the sales start and continue for 12 months. The stock is sold immediately after it settles following a vest, ie. on V+2 day. 3. you can cancel the program anytime by giving 60 day notice (during which the program is active). After reading CG14270, do I correctly assume that the disposal date when using ETP will be the day of vest, given that the ETP-originating sale is immediately binding, even if executed two days later? If so, should I report the CG corresponding to the same-day pool (as opposed to 30 day / 102s ones), ie. V+2 sale value - V cost?