SolvedCG40910 | Computation of gain in non-sterling currency - example
From HM Revenue & Customs · Capital Gains Manual
Example of disposal within CTA10\S9C
Example of disposal under CTA10/S9C following intra-group transfer within TCGA92/S171
Example of disposal within CTA10\S9C
On 1 September 2008 Finance One Ltd, a UK company with an US$ functional currency, acquired $200 of shares at a time when their Sterling value was £118.
On 1 September 2014 Finance 2 Ltd sold the shares to a third party for £350 sterling.
The computation is as follows:-
| - | Amount |
|---|---|
| Third party sale 1 September 2014 | - |
| Proceeds of sale £350 | - |
| converted into US$ at the spot rate on 1/9/14 (£350 at 1.6) | $560 |
| Less base cost | -$200 |
| Indexation 9/08 to 9/14 | -$46 |
| Net gain on disposal calculated in US$ | $314 |
| Gain converted into sterling at spot rate on date of disposal | £196 |
Example of disposal under CTA10/S9C following intra-group transfer within TCGA92/S171
On 1 September 2008 Finance One Ltd, a UK company with an US$ functional currency, acquired $200 of shares at a time when their Sterling value was £118.
On 1 September 2012 the shares were transferred to Finance Two Ltd, a fellow group company also with US$ functional currency, in a nil gain/loss transfer under TGCA92/S171 At that time the Sterling value of the shares was £125.
On 1 September 2014 Finance Two Ltd sold the shares to a third party for US$400.
The computations are as follows:-
Nil gain/loss transfer September 2012
| - | Amount |
|---|---|
| Cost converted to Sterling at date of acquisition | £118 |
| Add indexation 9/08 to 9/12 | £22 |
| Total | £140 |
Transfer deemed to take place for proceeds of £140, which will form the base cost of the asset for Finance Two Ltd. As this transfer takes place before CTA10/S9C comes into effect, the deemed proceeds are identified in sterling.
Third party sale September 2014
| - | Amount | Amount |
|---|---|---|
| Proceeds in US$ | - | $400 |
| Less Base cost | £140 | - |
| Converted to US$ at deemed date of acquisition 9/12(£140 at 1.6) | - | -$224 |
| Less indexation* 9/12 to 9/14 | - | -$24 |
| Net gain on disposal calculated in US$ | - | $156 |
| Finally, the gain converted into sterling at the spot rate at date of | - | - |
| Disposal 1 September 2014 | - | £97 |
* Indexation calculated as normal on the $US amount.