Income Tax Act 2007 section 809VK

Retention of funds to meet CGT liabilities

Section 809VK allows part of the proceeds from a disposal of a qualifying investment to be retained in the UK to meet a capital gains tax liability, rather than being treated as a taxable remittance, provided certain conditions are met and a certificate of tax deposit is purchased.

• When a qualifying investment is disposed of at a chargeable gain and the individual is liable to CGT, the actual disposal proceeds may fall short of the amount needed to cover both the offshore/reinvestment obligation and the CGT liability — this difference is called "the shortfall".
• The shortfall is calculated as the difference between the actual disposal proceeds and amount "Y", where Y equals the sum of the amount otherwise required to be taken offshore or reinvested plus the highest potential CGT rate applied to the chargeable gain.
• The individual may use up to the shortfall amount to purchase a certificate of tax deposit within the 45-day grace period, and this "permitted amount" reduces the sum that must be taken offshore or reinvested.
• The reduction only applies if HMRC is notified in writing that the deposit relates to this section and the deposit does not exceed the shortfall.