Capital Gain on Foreign property - RoE to use

Whether to use the RoE applicable at the dates bought and sold

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The client was in Australia for 10 years. She bought a property there which is now sold. All transactions were in the local currency. I have the CGT calculation in Australian dollars and now need to convert for the UK tax return. When choosing the exchange rates for the conversion, is it correct to use the rates applicable at the time the transactions took place? In other words, as the property was bought 10  years ago, do I use the AUS$ rate of that time to convert the purchase price? It makes a bg difference to the gain if I use that rather than the rate when the sale took place. Thanks in advance for any advice.

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By Montrose
21st Jan 2019 17:37

The rules can be crushing. The computations are all done only in sterling.

So the cost in AUS$ is calculated at the AUS$ /£ rate applying at the date of purchase, and the proceeds are similarly calculated at the AUS$ /£ rate applying at the date of sale. The mortgage is ignored even though its sterling equivalent at purchase and redemption show a currency deficit. If the property was residential then the penal 28% rate applies

Is it not likely however that the property was her PPR? There is no rule requiring a PPR to be located in the UK, so she may have no UK tax to pay!

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Replying to Montrose:
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By mcgalvin
21st Jan 2019 17:54

Thank you. I was afraid that would be the case.
Yes, there is some PRR for about half the period of ownership, and I am assuming that letting relief can also be claimed. Nevertheless there is still a chunky chargeable gain, not helped by the depreciation of the pound over time.

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Replying to mcgalvin:
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By Accountant A
21st Jan 2019 18:16

mcgalvin wrote:

Nevertheless there is still a chunky chargeable gain, not helped by the depreciation of the pound over time.

Indeed, but it is the actual gain so not like it was tax on a notional amount. (That is subject to Montrose's point re any mortgage?)

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