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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I have a Swiss property that has now been sold - in Swiss Francs

Customer Question

I have a Swiss property that has now been sold - in Swiss Francs there was no profit. However if I take the Uk values there is a profit of £150k ! The only other costs I incurred other than legal and professional was an early settlement charge of £75k !
Can I offset this against capital gain or can I only carry forward as a foreign property loss that will never be relieved?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
, I'm Keith and happy to help you with your question.
I assume that the Swiss property was additional to you UK sole or main domestic residence. On that basis any gain made on the Swiss property is liable to UK Capital Gains Tax (CGT).
You are most unfortunate in being caught by a change in exchange rates which in UK terms has created a gain. This gain exposes you to CGT.
To calculate the gain you must take the acquisition price in UK currency; that is what you paid plus buying costs. You then must calculate the disposal price which is what it sold selling costs. From the tenor of your question you made a gain of 150K from which can be deducted the 75K legal and professional fees leaving 75K chargeable. This is reduced by the Annual Exempt Allowance of 11K leaving 63K exposed to CGT. THis will be taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the year of sale.
As far as you are concerned there is no loss to be set against any other capital gain and none to carry forward; indeed you are in quite the reverse situation, the changes in exchange rates having landed you up with a gain.
I am so sorry to have to rain on your parade.
Customer: replied 2 years ago.

Sorry you misunderstood my question is about the early settlement charge of £75k on the mortgage(not legal and professional). Could this be allowable against capital gain or would it only increase the lettings loss

Expert:  bigduckontax replied 2 years ago.
Right, that does change the position. You could try setting it against the gain, but if the authorities jib then it would have to go against letting income.
As the property was let instead of the Annual Exempt Amount (AMEA) you could well be entitled to Lettings Relief which is available up to 40K to offset any gain. A tad better than 11K AEA.
Customer: replied 2 years ago.

but it was never my PPR

Expert:  bigduckontax replied 2 years ago.
I had assumed that in my answers. Had it been so the gain would have received 100% PPR or perhaps proportionately had it been your residence of your ownership.
Please note an error in answer: paragraph 2, line 1; delete 'AMEA,' insert 'AEA.'
Customer: replied 2 years ago.

I guess though that as a furnished holiday let I am entitled to entrepreneurs relief?

Expert:  bigduckontax replied 2 years ago.
I am of the opinion that this option might be open to you if your Swiss residence was used holiday lettings. Useful if it were as it would limit the tax rate on the gain to 10%, better than a poke in the eye with a sharp stick.
The HMRC web site gives the following advice following recent statements by the Government regarding Entrepreneurs' Relief:
'The relief will apply to gains arising on disposals of the whole or part of a trading business (including professions and vocations, but not including a property letting business other than furnished holiday lettings) that is carried on by the individual, either alone or in partnership.'
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you support.

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