Taxation of Chargeable Gains Act 1992 Schedule 11 paragraph 13

Devaluation of sterling: securities acquired with borrowed foreign currency

Paragraph 13 provides relief for investors who borrowed foreign currency before the 1967 devaluation of sterling in order to purchase foreign securities, by increasing allowable acquisition costs by a factor of seven-sixths when computing chargeable gains.

• Applies where foreign currency was borrowed before 19th November 1967 under Exchange Control Act permission to invest in foreign securities, subject to conditions that the loan be repaid from sale proceeds or investment currency and that the securities be held in a separate designated account.
• When computing a gain on disposal of designated securities or currency representing the loan, allowable acquisition costs under section 38(1)(a) are increased by multiplying them by seven-sixths — effectively adding one-sixth to the base cost.
• The total uplift across all disposals relating to any single loan is capped at one-sixth of the sterling parity value of that loan at the time it was originally made.
• Designated securities forming a separate 1982 holding continue to be treated as a separate pool until a disposal occurs where the one-sixth cap actually restricts the uplift that would otherwise apply.

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