Cash is generally not a chargeable asset for capital gains tax (CGT) purposes. Historically, the exception to this rule has been currency held in a bank account denominated in a currency other than sterling unless the cash was held for personal use such as for overseas holidays or the maintenance of an overseas holiday home.
Each movement into a foreign currency bank account was a purchase for CGT purposes and each withdrawal was a CGT disposal. This lead to time-consuming and costly calculations being required, often with the result is that there was minimal or no capital gain arising.
From 6 April 2012, capital gains arising on the withdrawal of funds from foreign currency bank accounts will no longer be subject to CGT. Any capital losses arising will not be allowable losses.
This exemption will not apply to foreign currency contracts such as forwards and options.
Removing the burden of calculating the CGT position for minimal benefit to the Government’s tax take seems a sensible step but there will doubtless be some who will lose out on claiming currency losses.