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Sam, Accountant
Category: Tax
Satisfied Customers: 14199
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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When calculating capital gains tax payable on an overseas property

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When calculating capital gains tax payable on an overseas property do I calculate the gain as follows. Purchase price in 2005 aprox 600,000 CHF sale price 700,000CHF so a gain in Swiss Francs of 100000 Swiss Francs. The sale was in 2014 and say the rate of exchange was 1.5 GB so the gain in GB pounds is aprox £65,000.
Many thanks
Customer: replied 2 years ago.
The exchange rate in 2005 was aprox 2.24 CHF
Thanks for your question- I am Sam and I am one of the UK tax experts here on Just Answer.
No its not quite correct you have to find the conversion rate at the time of purchase from CHF to sterling - then also the conversion rate at the time of sale (again to sterling) which then creates the actual gain in sterling
Thats the correct start point and I am shocked HMRC have suggested otherwise (I am ex HMRC and run my own accountancy business now)
Customer: replied 2 years ago.
Many thanks Sam,
The tax liability on the gain after capital gains personal allowance on the way you work it out is £40'000 between us (including the tax already paid in Switzerland being reclaimed) as some of the gain goes into the higher rate bracket.
The way I thought it was going to be done and the way the chap in the technical department of HMRC agreed would mean a nil payment. So I'm pretty devastated. Of course the property was bought with a huge mortgage so we didn't really pay just the purchase price, it was plus all the money we had to keep paying over for the mortgage with the exchange rate going against us each time we made a bank transfer.
So bad news but at least I've had a second opinion from you as the accountant we had for the last 10 years retired and we were given a new one.
Thanks again.
You are very welcome
I am sorry the news is not better - but if you imagine a normal capital gain position would be the real purchase price deducted from the real sale price, the difference with a foreign position is that the rate of exchange HAS to taken into account at the tax point, that the transaction arose.
So its sale price less purchase price to form the initial gain.
From this initial gain you can deduct the cost to buy and sell (legal fees etc) plus the costs of any capital improvements -
Then from this new figure you consider whether any tax reliefs are due
This would only be the case IF this had been your main residence at all, and if it had, then also a consideration for private lettings relief, if you then rented this out to tenants. If it had never been your main residence and was just a second property - then there are no tax reliefs.
So the amount left over then has the annual exemption allowance applied against it (and for 2014 £10900 each) and the whatever is left over is liable to capital gains.
From the UK capital gains tax bill, then the foreign tax suffered is deducted leaving a balance due to HMRC.
I wish I could help reduce this further for you - but this is the correct procedure - let me know if you require any further assistance.
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Sam and other Tax Specialists are ready to help you
Customer: replied 2 years ago.
Thank you Sam.