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Disposal of foreign property- which exchange rate?

Which FX rates apply for CGT computation of overseas property disposal

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An overseas property was bought in 2004. A deposit payment was made converting Sterling into Foreign Currency. Three months later the balance of the purchase price was paid converting Sterling into Foreign Currency. A mortgage for 50% of the purchase price was taken out and paid out to the mortgagee a month later. For CGT calculation purposes, do you use the FX rates at the various payment dates when Sterling was converted into Foreign Currency? Which FX rate do you use for the mortgage element? The date the mortgage was paid out to the mortgagee? Which FX rate do you use for the incidental acquisition costs- the date when they were actually paid (they were paid and converted from Sterling to Foreign Currency separately)?

The property was sold in 2019. The sale contract was signed in February. Proceeds were released by the conveyancer and local tax authorities in July and paid into the seller's Foreign Currency account. Proceeds were transferred to the UK, ie converted into Sterling in August. Which FX rate do you use for disposal proceeds? The date of the sale agreement (February)? The date of the proceeds deposit into Foreign Currency Account (July)? The date of the FX and transfer of proceeds to UK? What about incidental costs of sale, which had all been deducted from the proceeds paid into Foreign Currency account in July? 

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04th Aug 2021 22:19

I would suggest it may well be the exchange rate at the contractual date of purchase re the whole price and the same on the contractual date of sale re the whole price, certainly the tax point for CGT is on conclusion of contract not settlement date.

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Replying to DJKL:
By Tax Dragon
05th Aug 2021 07:46

Depending on the numbers here (and what difference it actually made) I could find myself with at least a moral dilemma if this OP appointed me to advise. There may have been errors in/omissions from previous returns. 2004 was, to the best of my knowledge, before FA2012.

And as David says it's not great that this question has arisen more than two years after the sale. That might be because there's an ongoing enquiry (more errors/omissions?). It might not.

Whatever the background, I think this might be one where appointing a professional to help resolve might be a sensible step.

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By David Ex
04th Aug 2021 23:25

If the disposal was in 2019, the return is late. Might be worth taking professional advice to avoid further problems.

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Replying to David Ex:
By Niatipac
05th Aug 2021 08:22

Thank you for your replies. I should have clarified that regardless of rates used, due to significant currency swings, there is a loss. A loss claim amending the 2019 return will be required.
I note that contract dates are what's stipulated in the manual, but elsewhere the use of rates at actual dates is being advised. It is not very clear.

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Replying to Niatipac:
By janewanless
05th Aug 2021 12:03

Was the 2019 return filed late? Is an amendment out of time?

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