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I bought a house in the US in about 2010 and used it as a holiday home for my family (it was never rented out).

In around 2013 I sold the house, which after paying the estate agents fees and leaving furniture in the house I made a slight loss on.

I had to jump through hoops with the IRS before they would release all of the money from the sale (they withheld around 20 % of the sale proceeds until I put in a tax return the following year). As I was awaiting all the proceeds to be released I left the whole amount I got from the sale in a US bank. About 1 year later I recovered the withheld amount but then had difficulties in the US bank transferring the amount to my UK about.

Anyway to cut along story short I bought dollars when the rate was good (at around $1.90 to £1) and sold (in 2016) after Brexit vote (rate of about $1.25 to £1).

Do I have to pay tax for the gain I have made, if I do will if be capital gains tax and at what rate.

Thanks in advance for any assistance.

  • 2
    This is one of those rare cases that IRS red tape actually helped someone. Congrats. – NL - Apologize to Monica Jun 12 '17 at 13:46
  • One way or another, you earned more of your home currency in proceeds than you paid for your house. It is very, very likely to be taxable [though not confident enough in UK tax to say so]; the main question will be whether you are allowed to consider it additional proceeds on your house [which is likely good as likely capital gains taxes would be less than regular income], or as a separate gain/income calculation. – Grade 'Eh' Bacon Jun 12 '17 at 15:23
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Disclaimer: I am neither a lawyer nor a tax-expert

This page on the HMRC site lists several pages that appear to be relevant, starting with CG78401 - Foreign currency: delayed remittances and on to CG78408 - Foreign currency: example which seems pertinent to your case [paraphrased]:

A property bought in 1983 is sold for a [taxable] gain in one tax-year (1986/87) but the proceeds cannot be released/remitted to the UK until later (1991/92), by which time currency fluctuations have created a second [taxable] gain.

The size of the first gain (selling the property) is determined by the exchange rate in effect at the time of the sale but because of local restrictions, this can be deferred. The size of the second gain (currency movement) is determined by the change in exchange-rate between the time of the sale and the time of conversion.

In your case, the first "gain" was actually a loss, so I believe you should be able to use this to offset any tax due second gain. This page states that losses can be claimed up to four years after the end of the tax-year in which they were incurred, so you are probably still OK.

(The example makes application under TCGA92/S279 to defer the gain made on the original sale [because of the inability to transfer funds], but as I understand it, this is primarily to avoid a tax liability in that year. Since you made a loss on the sale, there wouldn't have been a tax liability, so there would be no need to defer it).

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