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Selling a Foreign Property?

Selling a Foreign Property?

Many people misunderstand the tax rules applied when foreign assets, such as holiday homes, are sold.

If you buy a house in the USA for $250,000 when the exchange rate is £1: $1.50, and then sell the house in when the exchange rate is £1: $1.30, your base cost for UK capital gains tax purposes is £166,667 and not £192,308.

The cost is fixed using the exchange rate at the date of acquisition.  This is as foreign currency is a chargeable asset for capital gains tax purposes in its own right.

When the house is purchased we look at the acquisition and disposal of the US dollars as a separate transaction.  As in most cases the acquisition and disposal of the US dollars takes place in a very short timescale there is usually no gain or loss made.

However, if there is a delay in the use of the dollars or if the sale is aborted and they are converted back into sterling, a gain or loss can arise.

For more information, please contact Lesley Sutton on 01484 550037 or email lesley.sutton@revellward.co.uk.

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