Calculating capital gain or loss on foreign properties - USERNAME: william69 - 24/09/2018

Tax Question:

A UK resident buys a holiday house in France. It is paid for by a combination of (i) a euro loan in France and (ii) monies transferred (and exchanged) from the UK. The owner carries out substantial qualifying renovations over a 2 year period. Whilst doing this he takes out a new larger loan in euros to (i) pay off the first euro loan and (ii) pay for further builders euro invoices. All the monies borrowed will not have been immediately used to pay invoices so the ex-rate may have changed between borrowing the monies and using them. Further monies are sent from the UK to pay invoices. Some used immediately and some a bit later. Monthly capital payments are made to pay off part of each mortgage by remitting funds in euros from the UK. It would be an easy calculation to work out the capital loss or gain, on sale of the property if you apply the exchange rate at the time of acquisition and time of sale. -then convert, and deduct as a cost, each invoice on the payment date at the x-rate that day. However I suspect that is incorrect? If the simple calculation method above is wrong, what are the events which trigger a gain or a loss along the process described, and do HMRC offer any kind of worksheet/toolkit to help?

Answer:

Yes, you calculate the gain on the disposal of the properties based on the actual proceeds and costs converted to sterling at the date of the event.