Question
We have recently sold our property in France and paid 19% CGT in France. As we’re not French resident, the amount of CGT paid had to be calculated by a State appointed Fiscal Agent. Will this amount be used to determine our UK CGT liability?Answer
No, because the UK calculation must also include any gain or loss due to currency movements and the deductions you're allowed to make may vary from the French calculation.
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've transferred over the period of ownership using the exchange rate on the date of each transfer - not forgetting to remove from those transfers amounts that weren't spent on improvements or other allowable deductions.
The French capital gains tax you've paid may be credited against the UK liability, but if the French tax is greater you won't unfortunately get a refund. Don't forget you can both offset your share of the gain against your annual capital gains tax allowance (£10,600 for the 2012/13 tax year) when calculating the UK liability.
We have recently sold our property in France and paid 19% CGT in France. As we’re not French resident, the amount of CGT paid had to be calculated by a State appointed Fiscal Agent. Will this amount be used to determine our UK CGT liability?Answer
No, because the UK calculation must also include any gain or loss due to currency movements and the deductions you're allowed to make may vary from the French calculation.
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've transferred over the period of ownership using the exchange rate on the date of each transfer - not forgetting to remove from those transfers amounts that weren't spent on improvements or other allowable deductions.
The French capital gains tax you've paid may be credited against the UK liability, but if the French tax is greater you won't unfortunately get a refund. Don't forget you can both offset your share of the gain against your annual capital gains tax allowance (£10,600 for the 2012/13 tax year) when calculating the UK liability.
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