Foreign Property - Hard Times Can Bring Hard Luck

 

With things tough at home, owners of a foreign holiday property may be very tempted to sell and repatriate the proceeds, but take advice before you act. You might think that if the property has fallen in value, there will be no tax implications… but this is not necessarily so.

Consider the example of a holiday home bought in the Eurozone for €500,000 that would have cost about £320,000 at the then rate of exchange. Suppose the property is sold this year at a loss of €50,000. At first glance, you would think that you have suffered a €50,000 loss, so there is nothing to put on your tax return. The problem is that the exchange rate with the Euro is now about €1 = 90p, so the €450,000 would now be worth £405,000, producing a capital gain of £85,000 to put on your tax return, which could lead to a significant Capital Gains Tax (CGT) liability.

Whenever you are considering any substantial transaction, take professional advice. Many unpleasant tax surprises can be avoided with careful planning.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.