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Foreign bank interest accrued income: how to calculate

Practical Issues
air04
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Foreign bank interest accrued income: how to calculate

#202440

Postby air04 » February 19th, 2019, 9:41 pm

Hello,

I have fixed deposits in Indian Rupees(INR). Many of them are cumulative and pay the principal+interest on maturity. I talked to HMRC a few years ago, and told me that I can pay tax when I receive the interest on Maturity in that tax year.

I am not sure how to calculate the income. For example

start 1/1/2015 Rs 1,000,000 say GBPINR=80 , so £12500
end 1/1/2019 maturity value Rs 1,400,000 say GBPINR=95,
Interest = 400000/95=£4210.53
Total maturity value = 1,400,000/95= £14736.84
Real income in GBP = £14736.84 - £12500 = £2236.84

Will my income tax be on £4210.53 or £2236.84

For many years now, I have always used the £4210.53 calculation and paid taxes. I was wondering if I overpaid?

Thanks in advance,
ap

PinkDalek
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Re: Foreign bank interest accrued income: how to calculate

#202445

Postby PinkDalek » February 19th, 2019, 9:59 pm

I’d have gone for the £4,210. Being the sterling equivalent of the interest on the maturity date (if that’s the date HMRC tell you is the effective date the interest arises).

genou
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Re: Foreign bank interest accrued income: how to calculate

#202446

Postby genou » February 19th, 2019, 10:00 pm

All the transactions should be translated to GBP at the rate on the date that they occur - so the interest paid is translated to GBP on the day it is paid. The deposit of funds is a purchase of INR which gives you a base cost in GBP at the rate on the day of deposit. Withdrawals work the same way, but in reverse. When you get repaid , you have made a CGT gain or loss based on the comparison of the base cost in GBP and the proceeds in GBP. You can't do the calcs in INR, everything happens in GBP for UK tax purposes.

So I think your Interest = 400000/95=£4210.53 is correct for IT. But you have also suffered a CGT loss of £1,975

Purchase price £12,500 = Rs 1,000,000 @ 80/GBP
Sale price £10,525 = Rs 1,000,000 @ 95/GBP

PinkDalek
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Re: Foreign bank interest accrued income: how to calculate

#202452

Postby PinkDalek » February 19th, 2019, 10:17 pm

Didn’t the CGT treatment of foreign currency bank accounts change wef 2012, as per:

https://www.gov.uk/hmrc-internal-manual ... al/cg78321

Unless term deposits are treated differently.

air04
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Re: Foreign bank interest accrued income: how to calculate

#202454

Postby air04 » February 19th, 2019, 10:23 pm

Thanks PD and genou

genou wrote:
So I think your Interest = 400000/95=£4210.53 is correct for IT. But you have also suffered a CGT loss of £1,975

Yes, I though it so. But it is personal money foreign deposit, there is no CGT gain/loss on it the last time I read the manuals.

https://www.gov.uk/hmrc-internal-manual ... al/cg78315
https://www.gov.uk/hmrc-internal-manual ... al/cg78321
http://taxplanner.sopherco.com/article/ ... -accounts/

I do not understand the above, if the losses I made on bank deposits are CGT free or not.

Re-reading them, I think my foreign income is in a total mess. I have multiple fixed deposits, multiple bank accounts, some from money remitted from here, some from money I got when I sold property in India, some from deposit(s) interest etc. And some of the money has been used for our Indian expenses. I really hope I do not need to go back and amend returns. I may just give up on it, it is very complicated in my case(all money is mixed up). Fortunately, Rupee generally depreciated against Pound, so all I could have is some capital loss it I recalculated it all.

air04
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Re: Foreign bank interest accrued income: how to calculate

#202457

Postby air04 » February 19th, 2019, 10:25 pm

PinkDalek wrote:Didn’t the CGT treatment of foreign currency bank accounts change wef 2012, as per:

https://www.gov.uk/hmrc-internal-manual ... al/cg78321

Unless term deposits are treated differently.


PD, do you think it means that £4210.53 for IT and no way to claim the capital loss?

Thanks,
ap

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Re: Foreign bank interest accrued income: how to calculate

#202466

Postby PinkDalek » February 19th, 2019, 11:19 pm

Yes, that’s the impression I get but would be interested to see what genou or others respond.

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Re: Foreign bank interest accrued income: how to calculate

#202530

Postby genou » February 20th, 2019, 9:59 am

PinkDalek wrote:Yes, that’s the impression I get but would be interested to see what genou or others respond.


I'll respond that I'm out of date. It does look like taxable income and no CGT effect at all.

air04
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Re: Foreign bank interest accrued income: how to calculate

#202655

Postby air04 » February 20th, 2019, 3:17 pm

Thanks PD genou. I really appreciate your help with this.


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