Quirks of converting non-UK assets into sterling

In 2016 the taxpayers who are UK resident sold their apartment in Switzerland. They had bought the property in 2006 funding its cost in part by a cash deposit and a Swiss franc mortgage.

In their capital gains tax computation the taxpayers converted the proceeds into sterling and deducted the deposit. HMRC accepted the taxpayers’ calculation of the sales and purchase price (after deduction for chattels) by reference to the exchange rates used. It also accepted that the fees on each of the purchase and sale were reasonable. However it considered that not all the adjustments for foreign exchange fluctuations were permissible. The taxpayers had also used the wrong rate of capital gains tax. HMRC issued an amended assessment and a discovery assessment.

The taxpayers appealed.

The First-tier Tribunal said it was clear from case law that gains and losses had to be calculated in sterling. So...