I moved to the UK from Canada last year and am now a UK resident for tax purposes.Periodically I transfer money from Canada to a UK bank account. The money serves as a primary source of income for expenses.My understanding is that gains or losses on foreign exchange transactions are subject to capital gains. The gain or loss is calculated at the time of spending the money. Thus if the UK £ is strong at the time of spending, there may be a gain.Keeping track of each expenditure seems like an onerous task. Transfers amongst bank accounts, taking out ISA’s, credit card and ATM transactions, compound this. In nearly all cases, there is a loss as the banks or exchange companies transfer funds at a point or two higher than the official rate.I will be nowhere near the £10,600 threshold for capital gains. Thus, any tax calculations on the small gains or losses on £50,000 or so in transfers would wash out to £0 in any case. The CDN-Sterling rate fluctuates by a few percentage points over time. However, the effect on the £50,000 is small.Is anything like a simplified formula based on annual or monthly exchanges or rates? Better yet, could I simply look at the larger picture based on the relatively small amounts of gains or losses and not report as I am well below the threshold?
System of Law: England-and-Wales
Internet seaches, income tax software.
Thanks for your question
I am afraid there is no easier method, then establishing whether any gain has been made on each transaction,a s this needs to be identified on the date of the said transaction, and as the exchange rates change with frequency, other than using the HMRC official rates - link here, http://www.hmrc.gov.uk/exrate/
This may make your task a little easier.
However the other consideration that you seem to have not taken into account is that of remitting money into the UK, and whether the money itself needs to be declared for income tax purposes.
If you are declaring all the interest to HMRC, than there is no issue, or if none of the money being remitted is from a source of earned income, then there is no issue, but this is something you need to consider along with any capital gain effect the exchange rate might bring for capital gain purposes.
26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
Sam, I am going to post another question in about 10 minutes (or later today if I run low on time). I accepted your answer and added a bonus,
Thanks for your response
I will look for your new question - feel free to ask for me Sam Tax
Sam this is the second question. As a means of making sure it goes directly to you, I included it as a response then Accepted your reply of 13:49.
As for the concern about the taxes on investment and interest income in Canada, I realize these are all taxable in the UK as a UK resident. My drafts of the Foreign Pages include this income.
I may be thinking the wrong way around the capital gains on the movement of $CDN to £Sterling.
I was taking the position of a UK resident paying gains (or claiming losses) in foreign currency transactions. The other way of looking at it is to consider myself as a non-Canadian resident making capital gains (or losses) on the exchange of Canadian $ to £Sterling. Thus, the gains or losses would be in $CDN. These amounts would then be subject to the rules for a UK resident making capital gains in a different country.
These two options may sound like the same thing. However, there is a big administrative factor in calculating the second way. That is because Canadian tax rules allow for a form of annual averaging. That way I don't need to account for every latte in the UK.
Since I will be at a loss unless there is a huge jump in the Pound over the Canadian Dollar, I will then have no foreign capital gains to declare as UK taxpayer.
Sam, please see reply. I am accepting and will top up the account for you.
Thanks for your further question
Generally as the exchanges you are making from your transfer of Canadian dollars to sterling, would not be considered for capital gain purposes especially as you are already declaring the income that arises from these savings/investments.
But if we had a capital gain position arising, it would be a UK one, as you are resident in the UK and the gain would arise due to the fact that the money is coming into the UK, at which point the gain/loss arises. So you would never have been treated as a UIK resident making a gain/loss in a foreign country.
Thanks Sam. Your response makes life much easier. I will accept now.