Quite a lot of those mixed funds are denominated in currencies other than Sterling. My understanding of the FX rates to apply while on the remittance basis is:
- For foreign chargeable gains - this is calculated in sterling (disposal proceeds in GBP - acquisition basis in GBP) using the FX rates of the date of disposal and acquisition respectively, and the CG amount remains fixed in sterling and is then simply translated back to the foreign account currency using the FX rate of the day. In other words,the GBP CG is fixed but its foreign currency amount will vary with the FX rate.
- For all forms of foreign income paid in foreign currency - the income amount is fixed in the foreign currency, and only translated into GBP on the day of an actual remittance. Until such time, the foreign currency amount of the income item is fixed but the sterling amount varies
- For all forms of foreign income paid in Sterling (even if received in foreign currency or converted to foreign currency) - the income amount is fixed in Sterling - similar to chargeable gains
Assuming that I then switch to the arising basis in later years and continue to receive money into these same mixed funds, then the original 'remittance years' amounts continue to be treated in the same way as outlined above - but any new amounts received on the arising basis need to be converted into Sterling on the date they actually arise - including for foreign income paid in foreign currency.
Is this outline correct in principle?
And is this what people actually do in these circumstances? I found a number of publications from around the 2009-10 time (e.g. from the ICAEW - Foreign currency issues - Taxguide 4/11) which outline a debate between the 'HMRC view' and the 'practitioner view' with HMRC pushing for the above but practitioners taking an alternative approach where everything (incl. foreign income in foreign currency) is translated into sterling on the transaction date. I cannot seem to find anything more recent (from say the last 5 years) that gives a view on whether this debate was ever settled eg through case law. Are there any updated views on this?