What is the purpose of section 10A of the Taxation of Chargeable Gains Act 1992?

Section 10A prevents individuals from exploiting short periods of non-residence to escape UK capital gains tax. If someone leaves the UK temporarily, sells assets while abroad, and returns within five years, the gains are treated as arising in the tax year of return and become chargeable to UK capital gains tax.

How long must an individual remain non-UK resident to avoid the temporary non-residence rules?

The individual must generally remain non-UK resident for more than five complete tax years before returning. If they resume UK residence within that five-year window, any chargeable gains realised during the period of absence are brought back into charge to UK capital gains tax in the year of return.

How do the temporary non-residence rules interact with the statutory residence test?

Since the introduction of the statutory residence test, section 10A has been updated to operate within that framework. The rules examine whether the individual meets certain residence conditions before and after the absence. Finance Act 2019, Schedule 1, paragraph 2 aligned these provisions with the statutory residence test.

What happens to capital gains made abroad when a temporarily non-resident individual returns to the UK?

Gains realised during the temporary period of non-residence are treated as accruing in the tax year the individual returns to the UK. This means the individual becomes liable to UK capital gains tax on those gains as if they had been made in the year of return, effectively preventing tax avoidance through short-term relocation.

Taxation of Chargeable Gains Act 1992 section 10A

Temporary non-residents

Section 10A ensures that individuals who become temporarily non-resident in the UK cannot avoid capital gains tax by disposing of assets during a period of non-residence, and then returning to the UK.

If an individual leaves the UK for a temporary period of non-residence and realises capital gains during that absence, those gains can be taxed upon their return to the UK.
The provision targets individuals who were UK resident for a sufficient period before departure and who return to UK residence within a defined timeframe, typically five years.
Gains that arise during the temporary period of non-residence are treated as accruing in the tax year the individual returns to the UK, bringing them back into the charge to capital gains tax.
The rules were amended by Finance Act 2019, Schedule 1, paragraph 2, to align the provisions with the statutory residence test framework.

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