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I sold a property in Spain in August 2013, but the proceeds

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I sold a property in Spain in August 2013, but the proceeds are still being held in euros. For UK CGT purposes, will the sale proceeds be based on the exchange rate at the date of sale, or can I take into account the loss on exchange I would incur if I were to exchange today? Would I need to make the exchange back to Sterling in the same tax year as selling the property?
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi


Thanks for your question. My name is XXXXX XXXXX I am one of the UK tax experts here on Just Answer.

The sale proceeds are based on the exchange rate at the time of sale, I am afraid - as this was the true value at that time.
And I am afraid you cannot take into account the loss of the exchange rate, as this has no affect on the capital gain position.

And it does not matter when you transfer the money back into the UK, because if you are a UK citizen, then you are taxed on your worldwide income, so this sale has to be declared to HMRC for 2013/2014
But if you are a non domicile - you could consider being taxed under the remittance basis.
Let me know if this applies to you, and I can advise further whether this is a viable position to consider.
But also then advise whether any of the money has been remitted into the UK to date (or spent in the UK) and how long you have been a resident in the UK and the gain made (approx.) in sterling

Thanks

Sam

Customer: replied 2 years ago.

Thanks for your reply. My question was prompted by an article I found here:


http://www.taxcafe.co.uk/resources/tipsforforeignpropertyowners.html


specifically the last 2 paragraphs in section 6. Is this information incorrect or no longer valid?


 

Expert:  Sam replied 2 years ago.
Hi

Thanks for your response

I have read the article, and much of what this company publisise isn't quite offering the full facts as it bends the legislation for own situation to try and make it fit another, and many of their "advise" has led to challenges by HMRC and owed tax by taxpayers.

Whilst there is scope for an individual/businesses to be liable to capital gains on foreign currency exchange, as there is the ability to have a loss considered for the same,you have to be trading in foreign currency (as a trade)to even be considered for this, whereas you have sold a property abroad and the tax point has already been fixed to be the date of sale, and that's where your capital gain position arises.

What happens with the money, after that tax point, it up to you - but in itself any gain or loss is not considered to have a further liability/loss on exchange. So whilst this article is suggesting that loss of the exchange rate can be considered (and advises you to remit the money into the UK in the same tax year) its not offering the whole picture which is misleading.

Had you brought the money into the UK at the time the sale was complete you would not have made any loss on the exchange rate (other than perhaps the difference between the exchange rate at the time of purchase, when compared with the exchange rate at the time of sale)but when and how you utilise the proceeds from the sale - has no bearing at all on the capital gain transaction which arose back in August 2013.
And its only the costs surrounding the purchase and sale and costs borne during ownership, such as capital improvements that can be considered within this capital gain transaction.



Thanks

Sam








Customer: replied 2 years ago.

If the opposite situation had applied - if the exchange rate had moved in my favour since the sale, resulting in a gain on exchange, would I have been liable to UK tax on that gain? If so, it would appear we have a totally one-sided situation whereby I would be taxed on any gain, but cannot claim for any loss. Is it the case that a foreign currency holding is treated differently for CGT purposes from other assets, such as shares, gold, etc.?

Expert:  Sam replied 2 years ago.

Hi

 

Thanks for your response

 

 

 

No you would not have - as again you are not trading in trying to make a profit from exchange rates of currency. So you neither suffer or lose the position of exchanging money for tax purposes - as these are personal funds

 

 

Thanks Sam

Sam, Accountant
Category: Tax
Satisfied Customers: 13706
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Customer: replied 2 years ago.

OK, thanks for your help.


 

Expert:  Sam replied 2 years ago.
HI

You are very welcome and I am sorry that this misleading article has given you false hope - and so glad you sought professional help before proceeding with claiming this loss of currency against your gain position.

If you could take the time to rate the level of service, you have received, it would be appreciated, as this credits me for my time

Thanks

Sam

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