Taxes Consolidation Act 1997 section 541A

Treatment of debts on a change in currency

Section 541A sets out the capital gains tax treatment of bank accounts denominated in a foreign currency which, on 1 January 1999, became denominated in euro as a result of the introduction of the single currency. This section is now spent.

• Where a person held a bank account in the currency of another euro-participating state, that account (a debt owed by the bank) was deemed for CGT purposes to be disposed of and reacquired at market value on 31 December 1998, crystallising any inherent exchange gain or loss.
• Any chargeable gain arising on this deemed disposal was not assessable until the account was actually disposed of, i.e. until funds were withdrawn; however, a capital loss could be utilised immediately. The part disposal rules applied to partial withdrawals.
• Special provision was made for life assurance companies and undertakings for collective investment, which had their own regime for spreading realised and unrealised gains and losses over seven years; the deemed disposal was integrated into that regime rather than being treated under the general rules.
• Assets of special investment funds and assets subject to trusts created under special investment schemes were excluded from the deferral of the tax charge, so that any gain on the deemed disposal on 31 December 1998 was assessable immediately.