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Is this foreign exchange utilsation a CGT event?

Is this foreign exchange utilsation a CGT event?

We have a UK Resident client who deposited approximately $1million into a US Dollar account a few years ago. He has just purchased a property (for personal use) in the US using funds from this account.
I have researched the position regarding a potential gain on the disposal of foreign currency and TCGA 1992 s.269 states that "A gain shall not be a chargeable gain if accruing on the disposal by an individual of currency of any description acquired by him for the personal expenditure outside the UK of himself or his family or dependents (including expenditure on the provision or maintenance of any residence outside the United Kingdom)."
It would therefore appear on face value that no chargeable gain on the disposal of the currency would arise. However, for the purchase of a property, do the funds have to be specifically deposited abroad for the purchase of the property?
Would the above exemption apply even if the funds were deposited some time before the purchase of the property, and the purchase of the property was not the sole intention of depositing funds abroad?
If anybody has come across a similar case, their comments would be greatly appreciated.
Aidan Costello


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By k40911
02nd Nov 2006 13:44
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By wdr
02nd Nov 2006 14:28

As I have commented previously-the Revenue have their own views

see CG Manuals , para 78315
"A gain on the disposal of currency acquired by INDIVIDUALS for the personal expenditure outside the United Kingdom of themselves and their family or dependents is not a chargeable gain. This includes expenditure on the provision or maintenance of a residence outside the United Kingdom.

TCGA92/S269 applies only to currency which was specifically acquired for personal expenditure of this kind. If REMUNERATION, interest, dividends or other sums are received in foreign currency, that currency was not acquired for the purposes specified in Section 269."

That doesn't mean their opinion is right-in particular their gloss adding the word 'specifically' which is not to be found in the legislation'

I wouldn't bank on it , even if you could show that the client
can evidence an initial intention to acquire a property .

Somehow I don't think the courts would interpret the acquisition of a $1M property as 'personal expenditure'

. Look at the 'normal expenditure' rules for IHT-would you expect the purchase of a property to be part of 'normal expenditure'. That seems very like the concept of 'personal expenditure' for s269 purposes.

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02nd Nov 2006 15:12

Thank you both - sorry David!

Thanks for your helpful reply previously David. I did find it this morning after I posted this question. It had slipped out of sight but I found it after searching for my previous question.

Looks like the personal expenditure argument would be pushing our luck.,

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