selling holiday home -CGT implications for delayed completion

silvercar

We may be selling our holiday home (overseas - double tax agreement between countries).

Calculating everything in GBP there will be a significant capital gain. The buyer wants to exchange soon, with a completion delayed until Summer 2027. Both sets of (overseas) lawyers are negotiating a staged payment schedule. Obviously the buyer doesn't have access until completion and all monies paid.

We are broadly happy with this, I just wondered if there were any CGT implications. I know:

a) 60 day reporting doesn't apply to overseas property.

b) each payment made needs converting to GBP at the rate on the day the payment was made.

c) include the sale on the tax return for 2027/28. CGT will be due by 31 January 2029.

Am I missing anything?

One quirk is that CGT overseas is due on exchange, the overseas CGT will be lower than in the UK as the exchange rate is not relevant overseas. Also financial years overseas are calendar years. I presume that the tax I will pay overseas for 2026 can still be taken off the UK tax due 2027/28? Or should I be putting the overseas tax against 2026/27?

MeteredOut

<pedant mode>

GBP not GDP

</pedant mode>

mybestattempt

https://forums.moneysavingexpert.com/discussion/6667465/selling-holiday-home-cgt-implications-for-delayed-completion

The capital gain may in fact fall within the 2026/27 tax year because the deemed date of disposal of the property may be the contract date.

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14261

Another aspect is that although payment is staged/deferred, it seems the amounts involved are ascertained so the full amount of the gain arises at the contract date if that is the deemed disposal date.

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14881

silvercar

interesting…and impossible to calculate because the payments will be in the future at an exchange rate unknown.

JellyBeanie

https://forums.moneysavingexpert.com/discussion/comment/81992061#Comment_81992061

If you have agreed a total price then it is possible to ascertain, even if it is in a foreign currency.

where consideration for a disposal is payable in foreign currency that currency is to be brought into account at its value at the date of disposal. If the value of the currency subsequently falls, so that its value on receipt is less than the value brought into the account, the shortfall is not irrecoverable consideration and no claim can be made under Section 48.

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14930

poseidon1

An interesting thread in flagging the dangers of entering into a complex foreign currency property disposal with no precise understanding of the UK tax implications thereon.

In the present case the tax point being fixed at the date of the contract rather than future completion, appears to be mitigated by the fact that the tax point is the same for both Spain and UK taxes.

Therefore the 19% Spanish CGT taken at source during the contract year, will be available as a tax credit for UK reporting purposes in the same tax year thereby mitigating any excess UK CGT payable by January 2028 on a 2026/27 deemed disposal.

Of course the fact that the tax payable is fixed by reference to the contract exchange rate date raises the possibility of the actual monetary gain being less ( or greater) depending on how exchange rates change at each instalment receipt date.

I suppose some form of currency hedging is possible to help align the the taxable gain with the actual gain, but of course this further complicates an already complicated transaction.

silvercar

https://forums.moneysavingexpert.com/discussion/comment/81992175#Comment_81992175

how can you ascertain the gain when most of the CGT is due to exchange rates? Who knows what the rate will be at the time?

silvercar

https://forums.moneysavingexpert.com/discussion/comment/81992407#Comment_81992407

It’s not Spain, in fact it isn’t a Euro transaction. The disposal has to come at some point, and the financial years don’t align between countries, so even without a delayed completion, these problems are always likely to occur. I’m just trying to get a handle on it now.

Jeremy535897

It seems to me that the exchange of contracts creates a disposal at that date, and the fact that the consideration is deferred is irrelevant. The amount of the consideration in sterling is established by the exchange rate at the date of exchange.

There is then the question of what happens when the consideration is actually received, and that amount is different in sterling terms. It seems to me that a capital gain or loss arises on each receipt of consideration, comparing the sterling value of the instalment at the date of exchange with the amount of sterling received when the instalment is exchanged for sterling.

Asking Google's Gemini supports this conclusion:

"Yes, when a foreign asset is sold for a foreign currency in instalments, a separate capital gain or loss can arise on the foreign currency itself when each instalment is converted into sterling. 

For UK capital gains tax (CGT) purposes, the disposal of the asset and the receipt of foreign currency are treated as two distinct transactions.

Key Tax Principles (As of May 2026)

• Asset Disposal: The capital gain on the asset is calculated by converting the disposal proceeds into sterling at the exchange rate on the date of disposal.
• Currency as an Asset: Foreign currency is considered a "chargeable asset." When you receive foreign currency, you acquire it; when you convert it into sterling, you dispose of it.
• Instalment Treatment: If the payment is deferred (instalments), the gain on the asset is usually calculated based on the exchange rate at the time of the sale, not when the instalments are received. However, the subsequent conversion of each instalment can create a new exchange gain or loss.
• Calculation: Any gain or loss on the currency is calculated by comparing the sterling value of the instalment at the time of disposal to the sterling value when converted."

There is the added complication that gains or losses arising on foreign currency bank accounts for personal use are exempt.

poseidon1

@Jeremy535897 if I read you correctly , you are in accord with @mybestattempt on this issue and support the contention that section 48 TCGA 1992 is clearly in point here, and that the taxable disposal occurs at exchange of contract date for the entirety of the contract price irrespective of the fact proceeds are payable over a period of years by instalments.

The sterling equivalent of the entire contract value, will in my view be the exchange rate ruling on the date of the original contract, I can't see any ambiguity here bearing in mind Section 48 and associated tax cases specifically ignores when instalments are actually received.

As for the separate currency gain /loss when each instalment is received, this (to me ) appears irrelevant for tax purposes having in mind the ethos behind the 2012 legislative changes ( link below) to exempt foreign currency gains on bank account receipts for UK tax resident individuals .

https://assets.publishing.service.gov.uk/media/5a7a5912e5274a319e779a1c/foreign_currency_bank_accounts.pdf

If OP remains uncertain and in disagreement with the preponderance of opinion here despite the clarity of section 48, maybe best advised to seek (paid for) professional advice given the entirety of the UK tax would seem to be due by January 2028 and not January 2029 as assumed.

silvercar

Grateful for your input.

So it seems that CGT will be due based on the increase in property value (less buying and selling costs etc) converting both values into sterling at the time of purchase and the time of exchange on sale. Include on tax return 2026/27, pay by January 2028.

Any further gains or losses on exchanging the sale proceeds to GBP are irrelevant to the tax situation. The proceeds of the sale will be held in an account overseas opened on our behalf and in our name by our solicitor. He then uses some of the proceeds to pay the CGT due overseas (which will be a lot less than in the UK as a lot of the gain is due to currency movements) which is due on exchange according to local rules. He then retains control of the account until completion.

This is all manageable because the tax overseas will be paid at the latest by the end of 2026 and so can be put against the tax due in the UK as it is a later date. Thank goodness the situation isn’t reversed!

It seems I have the risk of paying CGT at exchange time and then suffering an exchange rate movement against me prior to completion. I’m so pleased I started this discussion as I can now discuss ways to mitigate this before exchange.

Thanks again.