Currency calculations

My client – who is resident and domiciled in the UK – purchased a property in the USA using a dollar account and financed by a loan in dollars for almost all of the value of the property.

During the relatively short period of ownership the US dollar strengthened considerably against the pound sterling and using the conversion rates at the dates of purchase and sale he made a significant paper gain on the property of about £40 000.

Unfortunately in US dollar terms the purchase price including allowable expenses exceeded the net sale proceeds by over $15 000. At no time were the dollars ever converted into pounds sterling so in the USA he has made a loss on the transactions.

My research indicates that my client will be charged to UK capital gains tax on the gain of £40 000 while...