Question
My question relates exclusively to the rates of exchange allowed by the Inland Revenue on Property Capital Gains Tax. I am strugling to find any clear guidance on the HMRC site. I easily find the the listing made for euros ( up to eight decimal places!) for the dates that are relevant to me but I am not sure whether they are applicable for CGT purposes. If they are, I am not clear as to whch of the rates for each year I may use. I do not have actual rates of exchange as I transferred amounts to France on a round sum basis over the eight year period of ownership and accessed them as required for the many improvement projects which we undertook.
The HMRC rates are accessible at http://www.hmrc.gov.uk/exrate/european-union.htm
Many thanks for your guidance.Answer
Let's start with the simple bit first. When calculating the gain on investments in a foreign currency HMRC requires you to use the exchange rates on the date you purchased the property and date you sold it. Quite straightforward.
However, you can reduce the gain on second homes/investment properties by deducting money you've spent on improving the property and buying/selling expenses - note: general maintenance and repair expenditure is excluded.
In theory you should use the exchange rate for every allowable deduction at the time each expense was incurred. If this is impractical HMRC would probably be comfortable if you instead simply deduct each chunk of money you transferred over the 8 years using the exchange rate on the date of each transfer (which I guess you can get from your bank statements if you didn't keep a log) - not forgetting to remove from those transfers amounts that weren't spent on improvements or other allowable deductions.
If you are subject to any French gains tax this may be credited against the UK liability
As ever with the taxman, provided you're not actively trying to evade tax then you shouldn't have any issues. However, it might be worth running the above past their telephone helpline to cover yuourself (although in my experience the helpline is soemtimes as useful as a chocolate teapot!).
My question relates exclusively to the rates of exchange allowed by the Inland Revenue on Property Capital Gains Tax. I am strugling to find any clear guidance on the HMRC site. I easily find the the listing made for euros ( up to eight decimal places!) for the dates that are relevant to me but I am not sure whether they are applicable for CGT purposes. If they are, I am not clear as to whch of the rates for each year I may use. I do not have actual rates of exchange as I transferred amounts to France on a round sum basis over the eight year period of ownership and accessed them as required for the many improvement projects which we undertook.
The HMRC rates are accessible at http://www.hmrc.gov.uk/exrate/european-union.htm
Many thanks for your guidance.Answer
Let's start with the simple bit first. When calculating the gain on investments in a foreign currency HMRC requires you to use the exchange rates on the date you purchased the property and date you sold it. Quite straightforward.
However, you can reduce the gain on second homes/investment properties by deducting money you've spent on improving the property and buying/selling expenses - note: general maintenance and repair expenditure is excluded.
In theory you should use the exchange rate for every allowable deduction at the time each expense was incurred. If this is impractical HMRC would probably be comfortable if you instead simply deduct each chunk of money you transferred over the 8 years using the exchange rate on the date of each transfer (which I guess you can get from your bank statements if you didn't keep a log) - not forgetting to remove from those transfers amounts that weren't spent on improvements or other allowable deductions.
If you are subject to any French gains tax this may be credited against the UK liability
As ever with the taxman, provided you're not actively trying to evade tax then you shouldn't have any issues. However, it might be worth running the above past their telephone helpline to cover yuourself (although in my experience the helpline is soemtimes as useful as a chocolate teapot!).
Read this Q and A at http://www.candidmoney.com/questions/question604.aspx
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