7. Session 7

Question 1: Nicolas

Nicolas is 25 years old, born in France, and first came to the UK in 2015/16.
His residency pattern between 2015/16 and 2024/25 is as follows:
- 2015/16-2017/18: UK tax resident
- 2018/19-2019/20: Not UK tax resident
- 2020/21–2021/22: UK tax resident
- 2022/23-2024/25: Not UK tax resident
He returned to the UK on 15 March 2026.
Requirement: Assuming Nicolas does not automatically qualify for the remittance basis (RB) in 2024/25, determine if electing for RB would require him to pay the RB charge.

Remittance Basis Charge (RBC) Analysis for Nicolas

The nine-year look-back period to determine if the remittance basis charge (RBC) applies runs from 2015/16 to 2023/24.
Nicolas's UK tax residency status during this period:
- 2015/16: Yes (1 year)
- 2016/17: Yes (2 years cumulative)
- 2017/18: Yes (3 years cumulative)
- 2018/19: No (3 years cumulative)
- 2019/20: No (3 years cumulative)
- 2020/21: Yes (4 years cumulative)
- 2021/22: Yes (5 years cumulative)
- 2022/23: No (5 years cumulative)
- 2023/24: No (5 years cumulative)
In 2024/25, Nicolas is not a UK tax resident.
Nicolas has been a UK tax resident for 5 out of the 9 years immediately preceding 2024/25.
Conclusion: Nicolas would not have to pay the £30,000 RBC if he elects to use the RB in 2024/25 because he has not been UK tax resident for more than 7 out of the last 9 years.

Question 2: Shane

In May 2024, Shane disposed of land in France, paying French tax of £20,000.
The chargeable gain for UK purposes is £50,000.
Shane has UK chargeable gains of £16,000 and capital losses of £17,700.
Shane is a UK tax resident and domiciled higher rate taxpayer.
Requirement: Calculate Shane’s Capital Gains Tax (CGT) liability for 2024/25.

Shane's CGT Liability Calculation for 2024/25

Shane is taxed on UK and foreign gains on an arising basis since he is a UK tax resident and domiciled.
Total chargeable gains:
- UK: £16,000
- Foreign: £50,000
- Total: £66,000
Less: Capital losses (£17,700)
Net chargeable gains: £48,300
Less: Annual exemption (£3,000)
CGT base: £45,300
CGT @ 20%: £9,060
Double Tax Relief:
- Lower of:
  - Foreign tax: £20,000
  - UK tax on foreign gain: £9,060
- Double tax relief is therefore £9,060, reducing the overall CGT to £Nil.

Detailed CGT Calculation

UK chargeable gains only: £16,000
Less: capital losses (£17,700)
Net chargeable gains: £Nil
Less: annual exemption (£3,000)
CGT @ 20%: £Nil
Therefore, the foreign gains are subject to UK tax of £9,060. Double tax relief is limited to £9,060, reducing overall CGT to £Nil.
Unrelieved foreign tax: £10,940 (£20,000 - £9,060).

Question 3: Rio and Maria (Summer 2009 - Question 2)

Rio and Maria, both Spanish domiciled, moved to Northern Ireland on 15 April 2024.
Rio is taking up a management position at the UK subsidiary of a Spanish retail clothing company.
Disposals during the 2024/25 tax year:
- (i) Rio disposed of a UK holiday home in Dorset on 25 January 2025 for £300,000 (cost £150,000 in 2008).
- (ii) Rio disposed of a Spanish commercial investment property on 30 June 2024 for £475,000 (cost £520,000 in 2008).
- Proceeds were lodged in a Spanish bank account.
- Rio has not made an overseas losses election for the remittance basis.
- (iii) Maria disposed of UK multinational company shares on 25 September 2024 for £4,000 (acquired in 2010 for £2,500).
- Proceeds were lodged in a UK bank account.
Requirement: Determine if each disposal gives rise to a chargeable gain or allowable loss for UK Capital Gains Tax purposes, assuming both Rio and Maria claim the remittance basis.

Residency and Tax Basis

Rio: UK tax resident in 2024/25 as he meets the first automatic UK test (present in the UK for at least 183 days) and the third automatic UK test (working full time in the UK).
Maria: Also UK tax resident under the first automatic UK test.
As both are UK tax residents, they are generally taxable on all chargeable gains on UK and foreign assets under the arising basis.
Split year basis may be available in 2024/25, treating them as non-UK tax residents from 6 April 2024 to 14 April 2024.
However, they can choose the remittance basis (RB) as they are not UK domiciled nor deemed UK domiciled for UK CGT/income tax purposes.
- UK CGT would only arise on foreign situs assets remitted to the UK.
None of the three scenarios where the remittance basis is automatically available are satisfied.
Since Rio and Maria have both elected to claim the remittance basis in 2024/25, neither is entitled to the £3,000 CGT annual exemption or £12,570 personal allowance.
As neither are long-term residents, they won't have to pay the remittance basis charge.

Rio's Disposals

Dorset Holiday Home: UK situs asset, so the gain on sale will be taxable in the 2024/25 tax year. No CGT annual exemption to reduce the chargeable gain.
Gain = £300,000 (Sale Price) - £150,000 (Cost) = £150,000.
Spanish Property: Sale of a non-UK situs asset triggers a loss of £45,000 (£520,000 - £475,000).
Rio has made a claim to be taxed on the remittance basis, but no claim has been made for the overseas loss election.
The foreign capital loss is not an allowable capital loss and cannot be offset against the gain on the UK property.

Maria's Disposals

UK Multinational Company Shares: As Maria is a UK tax resident and the shares are UK situs assets, the £1,500 gain on sale will be taxable.
Gain = £4,000 (Sale Price) - £2,500 (Cost) = £1,500.
There will be no CGT annual exemption to reduce the chargeable gain.

Question 4: Mr. Norris (Summer 2010 Question 4 Part (A) & (B))

Meeting held on 1 March 2025 with Mr. Norris.
Mr. Norris was born in Northern Ireland and has lived there all his life.
He has always been a UK tax resident and domiciled.
Mr. Norris has never carried on a trade or business.
Mr. Norris made a number of disposals in the 2024/25 tax year:
- (i) Painting bought in November 2008 for £4,000. Sold in June 2024 for £7,900. Costs of sale were £450.
- (ii) Sculpture bought for £8,600 in October 2006. Sold for £22,300 in July 2024.
- (iii) A personal computer for £200 in September 2024. The computer was bought in May 2017 for £850. Mr. Norris purchased an additional hard drive and monitor in June 2019 at a combined cost of £300.
Mr. Norris made no other disposals in the tax year 2024/25.
Mr. Norris will move to Madrid to live with his new wife on 6 December 2025.
He will be leaving the UK permanently and will sever all ties with the UK.
He will sell his home in December 2025.
Mr. Norris has utilized £34,415 of his basic rate band with other taxable income.
Requirement: Calculate the Capital Gains Tax (CGT) due, if any, for the 2024/25 tax year on the disposal of the above assets and sets out the due date(s) of payment.

Email to Mr. Norris

To: Mr.Norris@mn.org
From: tax.advisor@ta.org
Date: 1 March 2025
Subject: UK capital gains tax

Conclusions:

The UK capital gains tax liability arising from your disposals in the 2024/25 tax year is £2,445.
This is due for payment on or before 31 January 2026.
You intend to leave the UK on 6 December 2025 to move to Madrid.
Because you will have been in the UK for more than 183 days in the 2025/26 tax year, you will be classed as a UK tax resident in 2025/26, though split year basis may be available.
- You meet the first automatic UK test and do not meet any of the automatic overseas tests.
Your becoming a non-UK tax resident in future tax years will depend on if you meet any of the automatic overseas tests.
As you will be leaving the UK permanently and severing all ties with the UK, you will meet the first automatic overseas test and will be non-UK tax resident from 6 April 2026 unless the split year basis applies from 6 December 2025.
Split year basis is allowed where someone ceases to have a home in the UK if certain conditions are met.
Since you will be selling your home in December 2025, the split year basis will automatically apply in 2025/26, and you will be deemed a non-UK tax resident from the date you cease to have your UK home.
This will depend on the precise date the property is sold.
You will be a UK tax resident until that date and a non-UK tax resident thereafter.
As you will be a UK tax resident in 2025/26 until December 2025, you will be subject to UK capital gains tax on a disposal of the UK shares in September 2025.
A disposal of UK shares in January 2026 may not be taxable in the UK so long as you do not return to the UK within 5 years and trigger the temporary non-residence anti-avoidance rule.
This is also not taxable under the non-residents capital gains tax regime as an indirect disposal of UK land or property.

Appendix I: CGT Calculations

Sale of Painting

Proceeds: £7,900
Less: Costs of sale (£450)
Net proceeds: £7,450
Less: Base cost (£4,000)
Gain: £3,450

Calculation:

The painting is a wasting chattel; proceeds > £6,000, and cost < £6,000, the gain is the lower of:
- The actual gain of £3,450; and
- (5/3) \times (£7,900 - £6,000) = £3,166.67 \approx £3,167
Thus, the gain is £3,167.

Sale of Sculpture

Proceeds: £22,300
Less: base cost (£8,600)
Gain: £13,700

Calculation:

The sculpture is also a wasting chattel; normal CGT calculation rules apply.

Computer

Exempt from capital gains tax as it is a wasting chattel and has not been used in a trade; the non-wasting chattel rules do not apply.

2024/25 Capital Gains Tax Calculation

Painting: £3,167
Sculpture: £13,700
Subtotal: £16,867
Less: annual exemption (£3,000)
Taxable gains: £13,867

Capital Gains Tax Rates:

£3,285 at 10%: £329
£10,582 at 20%: £2,116
Total CGT: £2,445

Rationale

Basic rate band £37,700 – taxable income £34,415 = remaining basic rate band £3,285

Question 5: Mark Scanlon (Autumn 2011 - Question 3)

Scenario:

Mark Scanlon is an Irish domiciled individual who moved to Scotland in June 2013.
He moved to Spain with Maria in May 2017 and only returned to Scotland intermittently for short holidays.
Maria is a Spanish tax resident and domiciled individual.
Mark relocated back to Scotland on 6 April 2024 to commence a new job and signed a four-year employment contract.
Mark plans to purchase an apartment in Glasgow and needs to dispose of assets to fund the purchase.
Mark has not elected to claim the remittance basis in the 2024/25 tax year.

Asset Disposals:

1. Commercial property in Scotland sold on 1 June 2024 for £255,300. Auctioneer’s fees and solicitor’s fees amounted to £2,000 and £3,000, respectively. Mark inherited the property from his Scottish grandmother Lily Murray (Lily died in September 2007). The market value of the property at the date of Lily’s death was £200,000.
2. Shares in Ireland plc. sold on 20 April 2024 for £75,000. Mark acquired the shares in 2008 for £70,000. Mark lodged the proceeds of the sale to his Irish bank account.
3. A vase sold for £3,000 in October 2024, incurring costs of sale of £100. Mark purchased the vase at an auction in Scotland in 2011 for £7,000.
4. A site in Spain disposed of in December 2024 for £50,000. Legal and professional fees amounted to £3,000 on the sale. Mark acquired the site in May 2014 for £42,000 inclusive of costs. Mark and Maria originally planned to build a house on the site. The only construction work undertaken was in relation to the building of a swimming pool at a cost of £10,000. Mark spent £5,000 removing the swimming pool in order to market the property for sale.

Mark's Capital Gains Tax Liability for 2024/25

Mark is UK tax resident from 6 April 2024.
Mark is liable to UK CGT under the arising basis on the disposal of both UK and foreign assets as he is resident in the UK in 2024/25.

1. Commercial Property in Scottish Highlands:

Proceeds: £255,300
Less: disposal costs
- Auctioneers fees: (£2,000)
- Solicitors fees: (£3,000)
Net proceeds: £250,300
Less: base cost (probate value at date of inheritance): (£200,000)
Chargeable gain: £50,300

2. Ireland plc Shares:

A UK tax resident but non-UK domiciled/deemed domiciled individual is taxed on foreign chargeable gains on the arising basis unless they make a claim for the remittance basis of taxation to apply.
Mark has not made a formal claim for the remittance basis to apply for 2024/25 and so will be taxed on the default arising basis.
The sale of the shares in Ireland plc is therefore subject to UK CGT as follows:
- Proceeds: £75,000
- Less: base cost: (£70,000)
- Chargeable gain: £5,000

3. Vase:

As the vase is a non-wasting chattel, rules 2 applies as the cost is > £6,000 and proceeds are < £6,000.
Gross proceeds are deemed to be £6,000 and substituted for the actual proceeds of £3,000 as follows:
- Proceeds (deemed): £6,000
- Less: disposal costs: (£100)
- Net proceeds: £5,900
- Less: base cost: (£7,000)
- Capital loss: (£1,100)

4. Site in Spain:

Mark is UK tax resident, therefore, he is liable to UK CGT on the disposal of the Spanish site on the arising basis.
Irrelevant that he has remitted the proceeds to the UK as he has not claimed the remittance basis.
- Proceeds: £50,000
- Less: disposal costs (Legal and professional): (£3,000)
- Net proceeds: £47,000
- Less: base cost: (£42,000)
- Chargeable gain: £5,000

Computation:

Commercial property: £50,300
Shares: £5,000
Site: £5,000
Total: £60,300
Less: capital loss: (£1,100)
Net chargeable gains: £59,200
Less: annual exemption: (£3,000)
Net taxable gains: £56,200

Calculation:

Capital gains tax @ 20%: £11,240

Alternative Scenario:

If Mark had elected to claim the remittance basis in 2024/25, the treatment of assets situated outside the UK may potentially change i.e., the Ireland plc shares and the site in Spain.
- The treatment of the UK situs assets will remain unchanged.

Mark lodged the proceeds of the sale of the shares in Ireland plc to his Irish bank account, and did not remit the proceeds to the UK. If Mark had claimed the remittance basis in 2024/25, he would not be subject to CGT on the sale of Ireland plc shares in 2024/25.

Site:

Mark would be taxed in the UK on the sale of the site in Spain as he remitted the proceeds of the sale to his UK bank account.

Calculation:

The remittance basis charge of £30,000 would not apply as Mark has not been resident in the UK for 7 out of 9 years immediately preceding 2024/25.
When a formal claim for remittance is made, the CGT annual exemption (and personal allowance) is withdrawn.
Mark would therefore lose the CGT annual exemption of £3,000.
Overall, his taxable gains would be reduced by £2,000 (£5,000 gain on shares no longer taxable in UK less £3,000 lost annual exemption).

Question 6: Jimmy Johnston (Summer 2013 – Question 2 Part (D))

Jimmy Johnston emigrated from the UK to Australia on 10 April 2024.
On 31 October 2025, Jimmy sold 10 acres of Irish development land for £1,000,000, realizing a gain of £850,000.
Jimmy is considering returning to the UK in either December 2028 or May 2029.

Requirements:

(i) CGT Implications:

Under temporary non-residence rules, Jimmy will be chargeable to UK CGT on the gain on the sale of the Irish land if:
(a) One or more residence periods occur during which he is not UK tax resident; and
(b) In four or more of the seven tax years immediately preceding the year of departure, he was solely UK tax resident; and
(c) His period of non-UK tax residence is five years or less; and
(d) Whilst non-resident, he disposes of the land which is a chargeable asset that he owned at the date of departure (and that disposal was not subject to UK CGT at that time).
If Jimmy returns in December 2028, he will have been non-resident for less than 5 complete years (4 years and 8 months). Thus, the gain on the sale of the land will be chargeable to UK CGT in 2028/29.
However, if Jimmy waits until May 2029, he will have been non-UK tax resident for more than 5 complete years, and the gain on the sale of the land will not be chargeable to UK CGT.
Jimmy should not return to the UK until post 10 April 2029.

(ii) Situations Where No Formal Claim is Required for the Remittance Basis:

(a) Where the net unremitted income or gains arising overseas is less than £2,000; or
(b) Where there is no UK income or gains, and no remittances are made, and provided the individual has been UK tax resident for fewer than 7 out of the preceding 9 years or is under 18 years old throughout the year; or
(c) Where there is no UK income or gains other than taxed investment income not exceeding £100, no remittances are made, and provided the individual has been UK tax resident for fewer than 7 out of the preceding 9 years or is under 18 years old throughout the year.

Question 7: Louise and Paulo (Autumn 2013 – Question 5 Part (B))

Scenario and Requirements:

Louise is UK domiciled and has always lived in the UK.
Paulo was born in Italy and lived there until he moved to the UK in 2013.
The couple got married in Belfast on 31 December 2024 and moved to Italy on 20 January 2025.
Louise was no longer UK tax resident after moving to Italy.
Louise inherited shares in MOW (a US multinational company) from her grandfather in March 2024.
Louise is considering selling the shares in 2027/28 to repay the mortgage on her UK property.
Louise’s friend, Ciaran, advised her that if she sells the shares in MOW in 2027/28 but waits until after 6 April 2029 to return to live in the UK, she will not have to pay any capital gains tax in the UK on the disposal.

When a Non-UK Tax Resident Individual is Liable to Capital Gains Tax in The UK:

(a) Direct and indirect disposals of UK land or property under the non-residents capital gains tax regime are subject to UK CGT; and
(b) Gains arising under the anti-avoidance provisions for temporary non-residents are subject to UK CGT in the tax year of return to the UK.

Temporary Non-Residence Rule:

When Louise sells the shares whilst non-resident, it is not a UK asset used in a UK trade via a branch or agency nor an indirect disposal of UK land/property, as the company does not own any UK land/property. Therefore, the disposal whilst non-resident will not be subject to UK CGT under these exceptions for non-residents.

Conditions For Temporary Non-Residence Rule Application:

Louise will be chargeable to UK CGT on the gain on the sale of the shares if:
- (a) One or more residence periods occur during which she is not UK tax resident; and
- (b) In four or more of the seven tax years immediately preceding the year of departure she was solely UK tax resident; and
- (c) Her period of non-residence is five years or less; and
- (d) Whilst non-resident, she disposes of the shares which are a chargeable asset that she owned at the date of departure, and that disposal was not subject to UK CGT at that time.

Critique of Ciaran's Advice:

Louise would meet all of the above tests if she returned to the UK on 6 April 2029, as her period of non-UK tax residence would be less than five years. Ciaran's advice is therefore incorrect.
Louise's period of non-residence must be more than 5 complete years from the date that Louise moved to Italy – i.e., she must remain non-UK tax resident until after 20 January 2030.

Question 8: Sufficient Ties Test (Summer 2015 – Question 2 Part (D))

The “Sufficient Ties Test” reflects that the more time someone spends in the UK, the fewer connections they need to have with the UK to be treated as UK tax resident.

5 Ties or Connecting Factors:

Family
Accommodation
Work
90 days
Country (leavers only)

Question 9: James Schneider and Robert Hogan (Autumn 2015 – Question Four – Part (A))

Scenario:

James Schneider and Robert Hogan operate an IT consultancy business in the UK as a partnership.
James is actively involved in the business, while Robert provides expert advice.
Profits and capital are shared in a 75:25 ratio (James:Robert).
James is Austrian domiciled but has been resident in the UK for six years.
Robert is UK domiciled but is not UK tax resident.

Key Information:

The partnership purchased investment land in Austria on 20 January 2006 for £400,000. Legal fees of £20,000 were incurred on purchasing the land.
The land was sold on 14 September 2024 for £850,000. Legal and auctioneers’ fees of £50,000 were incurred in connection with the disposal of the land.
CGT totaling £45,000 was paid in Austria in connection with the disposal of the land.
James reinvested £200,000 of his proceeds in the partnership.
James has submitted a claim to be taxed on the remittance basis for the 2024/25 tax year.

Requirements:

i) Calculate the potential Capital Gain arising in the UK on the disposal of the land in Austria for James Schneider and Robert Hogan, clearly showing all of your calculations.
ii) Advise the basis on which James Schneider and Robert Hogan will or will not be liable to Capital Gains Tax in respect of this disposal.
iii) Calculate the 2024/25 Capital Gains Tax liability (if any) arising on the disposal of the land for James Schneider and Robert Hogan, assuming a Capital Gains Tax rate of 20% in each case.

CGT Calculation:

Proceeds: £850,000
Less: Incidental costs of disposal (£50,000)
Net Proceeds: £800,000
Less: Base cost £400,000
Costs of purchase: £20,000
Total: (£420,000)
Chargeable gain: £380,000

Apportioned Based On Capital Sharing Ratio:

James (75%): £285,000
Robert (25%): £95,000

Liability:

### James Schneider:
- Austrian domiciled and not UK deemed domiciled but UK tax resident.
- Under first principles, James is taxed on the arising basis, but as he claimed to be taxed on the remittance basis, he will only pay UK CGT on the gain on the Austrian property if he remits the proceeds to the UK.
### Robert Hogan:
- UK domiciled - not UK tax resident.
Robert will only be subject to UK CGT on the disposal of the Austrian property is he returns to UK within a period of 5 years after becoming non-UK tax resident.

2024/25 Capital Gains Tax liability:

### James Schneider:
- Taxable gain limited to proceeds remitted £200,000
CGT @ 20% £40,000
Less: double tax relief on lower of UK CGT (£40,000) and Austrian CGT paid (£45,000 x 75% x (\frac{200,000}{285,000})) (£23,684)
CGT payable in the UK £16,316

Question 10: Frank Flintoff (Summer 2017 – Question 4 – Part (B))

Frank Flintoff invested £50,000 for a 25% shareholding in MIB Limited (a US multinational company) on 1 March 1996.
Frank emigrated from the UK to Canada on 1 February 2020 and became tax resident in Canada.
On 5 January 2025, Frank sold his shareholding in MIB for £2,500,000.
Frank has decided to return to the UK permanently on 1 December 2025.

Requirements:

a) Explain to Frank when a non-UK tax resident individual is liable to capital gains tax in the UK and outline the UK Capital Gains Tax implications for Frank (if any) on his return to the UK on 1 December 2025. Detailed calculations are not required.

When a Non-UK Tax Resident Individual is Liable to Capital Gains Tax in The UK:

A UK tax resident individual is liable to capital gains tax on worldwide gains under the arising basis.

Three exceptions:

1. If the non-UK tax resident person is carrying on a trade in the UK through a branch or agency, gains arising on disposals of UK chargeable assets used for the purpose of the UK business are subject to UK CGT;
2. Direct and indirect disposals of UK land or property under the non-residents capital gains tax regime are subject to UK CGT; and
3. Gains arising under the anti-avoidance provisions for temporary non-residence are subject to UK CGT in the tax year of return to the UK.

Application of UK Temporary Non-Residence Rules to Frank:

Frank will be charged to UK capital gain tax on the gain on the sale of the shares if:-
- a). One or more residence periods occur during which he is not UK tax resident; and
- b). In four or more of the seven tax years immediately preceding the year of departure he was solely UK tax resident; and
- c). His period of non-UK tax residence is five years or less; and
- d). Whilst non-resident, he disposes of the shares which are a chargeable asset, and that disposal was not subject to UK CGT at that time
Frank plans to return to the UK on 1 December 2025, his period of non-UK tax residence will be more than 5 years, and thus the gain on sale of shares (sold