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A limit is placed on the maximum amount of credit allowed against a person's capital gains tax for a tax year. This works in a parallel fashion to the limit on income tax credit described in E6.433A above. For further commentary on matters specific to double taxation relief and chargeable gains, see E6.438. For background on capital gain generally, see C1.101.

The situation with capital gains is more complex than for income tax because the calculation of the gain using overseas rules may differ greatly from the UK gain. The gain itself, as calculated overseas may be greater, or smaller than the UK gain. This is reflected in the rules below.

The amount of credit relief in respect of any particular capital gain must not exceed the difference between¹ :

(a) the amount of capital gains tax to which the person would be liable for the tax year if the person were charged to capital gains tax on the total amount of the chargeable gains accruing to the person in the tax