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  • FIRST POST
    • clicka
    • By clicka 12th Oct 18, 11:17 AM
    • 8Posts
    • 1Thanks
    clicka
    Foreign Property Loss - Cyprus
    • #1
    • 12th Oct 18, 11:17 AM
    Foreign Property Loss - Cyprus 12th Oct 18 at 11:17 AM
    Hello
    Iím looking for some advice in respect of offsetting Capital Gains Tax made on a UK rental property when I sell it against a loss made on a property I have in Cyprus.

    I was unfortunate / stupid / call it what you like to purchase a 2 bed flat in Cyprus with a Swiss Franc mortgage just before the huge property crash. I fully furnished the property in Cyprus and managed to secure a few rental bookings (few being a number you can count on your fingers!). When I had rentals I included them on my tax return, but when everything went sour and I stopped paying the mortgage / service charge / bills etc on the Cypriot property as I had no outgoing or incoming charges against the property I stopped including it on my tax return (hope this doesnít come back to haunt me).

    I am nearing a position now where I am (through lawyers) negotiating with Alpha Bank in Cyprus to finally rid myself of this nightmare. But it will come at a cost.That cost being, crudely summarised: i) fees to lawyers, ii) court fees in both UK and Cyprus, iii) an amount to pay the bank to take the property back, iv) losing every penny I invested into the property.

    Now, back in the UK I was fortunate enough to be able to keep the first ever flat I purchased when I got married and moved into a house. Iíve been renting it out and have filled a tax return against it every year.Iíve not lived there for a considerable amount of time.In order for me to meet the ever growing costs of leaving the Cyprus nightmare behind me I am going to have sell this flat.

    I understand there will be Capital Gains tax to pay on the sale of my flat (which is probably going to be more than I think).

    My question to the forum is this, and I appreciate I will need to seek professional advice in the long term but Iím hoping to get an idea of where I stand from you guys:

    Can I offset the Capital Gains made on my UK flat against the losses I have made on the Cypriot apartment?

    Any advise will be greatly appreciated, including who to reach out to professionally.

    Many thanks

    Mark
Page 1
    • Keep pedalling
    • By Keep pedalling 12th Oct 18, 2:27 PM
    • 5,668 Posts
    • 6,457 Thanks
    Keep pedalling
    • #2
    • 12th Oct 18, 2:27 PM
    • #2
    • 12th Oct 18, 2:27 PM
    You can offset you losses agains your gains, but I am not sure if you can claim beyond the the amount of money you put in. You can’t claim the furnishing costs and I doubt if you can claim all those legal costs.

    First thing to do though is to get a grip on what sort of taxable gain, if any, you have on the UK property.
    Last edited by Keep pedalling; 12-10-2018 at 4:17 PM.
    • Pennywise
    • By Pennywise 12th Oct 18, 3:28 PM
    • 10,891 Posts
    • 20,541 Thanks
    Pennywise
    • #3
    • 12th Oct 18, 3:28 PM
    • #3
    • 12th Oct 18, 3:28 PM
    Yes, but I suspect the loss on Cyprus will simply be the difference between purchase price and selling price, plus legal costs to buy and legal costs to sell. I doubt if any foreign currency losses or legal costs re the currency issues will be allowable.
    • londoninvestor
    • By londoninvestor 12th Oct 18, 7:47 PM
    • 488 Posts
    • 405 Thanks
    londoninvestor
    • #4
    • 12th Oct 18, 7:47 PM
    • #4
    • 12th Oct 18, 7:47 PM
    I doubt if any foreign currency losses or legal costs re the currency issues will be allowable.
    Originally posted by Pennywise
    Correct as far as the CHF mortgage goes (sorry, OP).

    HMRC link

    From the point of view of the borrower, the loan itself is a liability, not an asset. It follows that any loss on the loan incurred by the borrower, perhaps because of movements in the rates of exchange of the foreign currency into sterling between the receipt of the loan and its repayment, is not allowable for capital gains purposes.
    by HMRC
    • jimmo
    • By jimmo 12th Oct 18, 9:34 PM
    • 1,999 Posts
    • 2,423 Thanks
    jimmo
    • #5
    • 12th Oct 18, 9:34 PM
    • #5
    • 12th Oct 18, 9:34 PM
    Just a word of caution. You have not yet disposed of the Cyprus property so you have not yet realised a Capital Gains loss. For your plan to work you will need to dispose of it, at the latest, by the end of the tax year in which you dispose of the UK property.
    Capital gains losses can only be set against gains in the same tax year or carried forward. They cannot be carried back.
    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15810
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