Capital Gains Tax
Discussion
Slightly off-topic from 'Business' maybe, so I apologise in advance...:-)
My wife and I currently live in Germany, where we moved in March 2000. We still own two properties in the UK which we rent out. In Germany we rent, but are considering buying, but in order to fund that we'd need to sell one (or possibly both) of the UK properties.
Given that we're non-resident (but tax-paying) UK citizens I assume we're liable for CGT on any profit we make on selling the UK properties?
Can anyone tell me what that liability is, and how we could (if possible) reduce our liability?
Cheers
Keith
My wife and I currently live in Germany, where we moved in March 2000. We still own two properties in the UK which we rent out. In Germany we rent, but are considering buying, but in order to fund that we'd need to sell one (or possibly both) of the UK properties.
Given that we're non-resident (but tax-paying) UK citizens I assume we're liable for CGT on any profit we make on selling the UK properties?
Can anyone tell me what that liability is, and how we could (if possible) reduce our liability?
Cheers
Keith
I would assume that, as you are resident in Germany, you should not be liable to UK Capital Gains Tax - but that you might be laible to the German equivalent if there is one. The worst case scenario would be if you were liable to both German AND UK CGT.
Whatever about your place of residence for tax purposes, the CGT treatment of domestic dwellings can be quite complicated -
there is the general exemption from CGT of Principal Private Residences (PPRs)
there are reductions in the cheargeable gains arising on properties which may have been PPR at one time
there are also reductions in the chargeable gains for properties which might have been your PPR at one point AND were also let
there are the usal reductions in the chargeable gains due to indexation relief and taper relief
there is also the annual Capital Gains alolwance avaialable to individuals - currently £8,200 per nannum.
if both properties are jointly owned, that means the gains could be reduced by £16,400. The really clever thing to do would be to make sure the both properties are not disposed of in the same tax year. This would ensure that the Perssonal Allowances are made use of in two tax years, not one ( i.e. £8,200 x 4 = £32,800).
Whatever about your place of residence for tax purposes, the CGT treatment of domestic dwellings can be quite complicated -
there is the general exemption from CGT of Principal Private Residences (PPRs)
there are reductions in the cheargeable gains arising on properties which may have been PPR at one time
there are also reductions in the chargeable gains for properties which might have been your PPR at one point AND were also let
there are the usal reductions in the chargeable gains due to indexation relief and taper relief
there is also the annual Capital Gains alolwance avaialable to individuals - currently £8,200 per nannum.
if both properties are jointly owned, that means the gains could be reduced by £16,400. The really clever thing to do would be to make sure the both properties are not disposed of in the same tax year. This would ensure that the Perssonal Allowances are made use of in two tax years, not one ( i.e. £8,200 x 4 = £32,800).
Well, we are liable for UK income tax on the rental income, so I was assuming we'd be liable for CGT also.
It's a bit of a funny situation. There's a reciprocal agreement between germany and the UK regarding tax, but they treat it differently. Basically the UK tax man doesn't care what I earn in Germany, only in the UK. The German tax man wants to know all about my UK assets, but as long as I can prove I've filed a UK tax return for those assets, he's only concerned with my assets in Germany.
I guess I'll need to find a good international tax consultant to be sure. Any one know of anyone?!
It's a bit of a funny situation. There's a reciprocal agreement between germany and the UK regarding tax, but they treat it differently. Basically the UK tax man doesn't care what I earn in Germany, only in the UK. The German tax man wants to know all about my UK assets, but as long as I can prove I've filed a UK tax return for those assets, he's only concerned with my assets in Germany.
I guess I'll need to find a good international tax consultant to be sure. Any one know of anyone?!
The best approach would be to work out what UK CGT you might be liable to - making sure you avail yourself of all the the reliefs and allowances available.
If either of you lived in either of the properties for any length of time, then the PPR exemption does come into play. The normal procedure is to time apportion the non-PPR time against the total length of time the property has been in your posession. You will only be liable for the element of the gain that arose in the time the property was not your respective PPRs. Normally, the last three years of ownership are treated as being exempt as well, even if you weren't actually living in the property.
You may find that your CGT liabilities are quite low, or possibly non-existent.
>> Edited by Eric Mc on Thursday 14th October 16:57
If either of you lived in either of the properties for any length of time, then the PPR exemption does come into play. The normal procedure is to time apportion the non-PPR time against the total length of time the property has been in your posession. You will only be liable for the element of the gain that arose in the time the property was not your respective PPRs. Normally, the last three years of ownership are treated as being exempt as well, even if you weren't actually living in the property.
You may find that your CGT liabilities are quite low, or possibly non-existent.
>> Edited by Eric Mc on Thursday 14th October 16:57
Sniff said:
Thanks Eric. I am in contact initially with the IR, and should it be necessary after that I will find a good accountant/tax specialist.
I was looking into this recently for my BIL, and the inland revenue website had all the info about CGT liability when the property had been a residence for part of the period of ownership - don't have the page ref., but go to www.inlandrevenue.gov.uk and do a bit of searching.
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