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Calculate Capital Gains on US Share disposal

Calculate Capital Gains on US Share disposal

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Hi All,

I am being a slow at the moment, apologies for this stupid question. I have a client who during the 20/21 tax year bought and sold some US shares and made a gain. Do I convert the gain to Sterling at the date of disposal and that is what goes in for the CGT, so for example a gain on disposal of $1000 and exchange was $2/ £1 therefore they make a UK gain on £500. Or do I need to convert the cost from USD to sterling at purchase, convert the disposal proceeds from USD to sterling and then that is my gain. 

The reason for my question that on a few of the diposal when using the second method it has created a loss in sterling due to the exhange rates even though a gain was made in USD. Not sure if the table will display properly, but I have put in an example:

  Date $ Exch £
Purchase 01/12/2020 6200 1.3305 4659.90
Dispose 01/03/2021 6400 1.4051 4554.84
         
    200   -105.06

Thank and sorry again if it is a stupid question. 

Replies (6)

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By Wanderer
24th Jan 2022 21:07

Convert cost at exchange rate at time of cost.
Convert sale proceeds at exchange rate at time of sale.

Watch matching rules as many US brokers use FIFO or other random methods which are nowhere near how you must match under UK rules.

Thanks (2)
Replying to Wanderer:
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By ShoulderShrug
24th Jan 2022 21:22

Wanderer wrote:

Convert cost at exchange rate at time of cost.
Convert sale proceeds at exchange rate at time of sale.

Thank you that. I had a feeling that is what the answer would be. I doubted myself as I thought what would happen if the exchange went to $1/ £1.

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Replying to ShoulderShrug:
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By Wanderer
25th Jan 2022 01:46

Wait until you get a US property transaction when there are years between purchase & sale. Sometimes get these when the $ amount shows a loss but the £ amounts show a large profit.
Client's struggle massively with the concept then but seem to readily accept the position when the outcome is reversed.

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By David Treitel
25th Jan 2022 13:42

UK case law requires one uses the spot daily exchange rate for each purchase and sale. Where bought on more than one date, a UK share pool is required.

Please check carefully that none of the shares are actually non-reporting US mutual funds or ETFs, with the gain taxable as an offshore income gain. Reporting offshore income gains as capital gains is a frequent mistake with US brokerage accounts.

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Replying to David Treitel:
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By ShoulderShrug
26th Jan 2022 09:46

Thanks.
Thankfully they are are just normal buying and selling of shares.

It just threw me as they clearly made a gain in USD but with conversion to sterling, they made a loss.

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Melchett
By thestudyman
25th Jan 2022 14:50

Dont forget the commissions (if any) paid for the base cost and the disposal proceeds!

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