Readers' forum: The gain in Spain

In February 1992 my client bought a holiday apartment in Spain for about 7m pesetas. He has recently sold it for €144 000. I am struggling with the significance of various deductions from the proceeds made by the lawyers on the completion statement for the computation of UK capital gains tax.

There is a “withholding” of 3% of the gross sale proceeds (€4 320) which is said to be for Spanish capital gains tax. Under the double tax agreement with Spain a UK resident “may” be charged to capital gains tax in Spain on the sale of Spanish immovable property so a deduction seems fair enough. But a little internet research suggests that the Spanish rate is 20% and the purchase cost converted into euros at the starting rate of 166.386 would be only €44 849. So there appears to be a huge capital gain...