Introduction to this document

Election for foreign losses

If you are non-UK domiciled but tax resident here, you may claim the remittance basis. To receive any kind of relief for foreign losses, an election must be made, but this shouldn’t be done without careful consideration.


If you are UK resident, but not domiciled or deemed domiciled, then the availability of foreign losses depends on the basis of taxation you use. If you are using the arising basis, you are treated like any UK domiciled resident, and can claim relief for foreign losses.

If you are claiming the remittance basis, the default position is that you cannot use foreign losses. However, it is possible to make an election to obtain relief for them, but it is not as straightforward as simply being able to deduct foreign losses. An election actually affects the way all your losses are relieved, and can mean UK losses have to be offset against foreign gains before UK ones. This will not always advantageous, for example where there are taxable UK gains, but only unremitted foreign gains. Once made an election is irrevocable. You therefore need to think very carefully about whether to make it.


Effect of an election

If an election is made, you have to offset all of your losses (UK or overseas) in the following way:

  • first, against foreign gains arising in that tax year that are remitted in the tax year (or the UK part of a split year)
  • next, against unremitted gains arising in that tax year
  • finally, against other gains, i.e. UK gains.

This strict ordering remains in force even if you switch to the arising basis in a later year.

If an election is made, and UK losses are offset against unremitted gains, you can remit those gains in a subsequent year without it being a taxable remittance. This can make up for the fact that the UK losses weren’t used against UK gains, and therefore that UK CGT had to be paid.


Time limit

An election must be made for the first year that you claim the remittance basis (the relevant tax year), or the opportunity will be permanently lost - even if you go on to be taxed on the arising basis, then back to the remittance basis. Because of the way time limits for elections work, you can make a claim for the relevant year up to four years following its end.

Example. Marco (a non-dom) moves to the UK in 2018/19. He claims the remittance basis and is unsure of whether to make an election in respect of foreign losses. He doesn’t need to make a final decision and notify HMRC until 5 April 2023. 

Note. If you don’t make an election, then you will never be able to relieve foreign losses whilst you remain non-domiciled and claim the remittance basis. When considering whether to make the election, it is therefore essential to consider the probability that you will be making large losses overseas.