Capital Gains Tax

#1
My wife and I each own a property on the same street in Wales, bought before we were married. We are now expats in UAE with 3 kids and would like to sell one of the properties to fund a property outside UK. I would be grateful to learn if there is any way to reduce the amount of CGT we would be liable for on sale of my wifes property. Both are currently let out to cover bills etc

Many thanks
 
#3
Unless I am missing something the only legal advice I am paying for is flat fee to sort my Mothers Will - and to be honest I would not trust the advice of that firm past what I am committed to
 
#4
I have always been under the impression that, as long as you have lived in a property at some point capital gains tax does not apply. You bought it as a home not a business venture. But I second the above advice to speak to a pro.
 
#5
You must be resident in the property you dispose of to avoid CGT but you can also claim that you vacated the property to make for an easier sale. However you just flip (like MPs do!), you make the residence you're selling your main residence and Bob's yer Uncle but I'm no lawyer so you'd have to get it verified but that is certainly how it used to be.
 
#7
You can get some relief on a capital gain on a property proportionate to the period that it was your main residence. IF it ever was. Don't tell fibs they will catch you.

If you have all the bills for improvements made since the original purchase or take pver of ownership such as new roof, conservatory, central heating etc then they can be deducted from the profit before CGT

Also if it was in joint names then you both get to use your tax allowances against your individual gains. Assuming you are both ex pat with no other UK income that should help. However if you are getting rents then that comes under Schedule A and your allowances are already eaten into if not consumed entirely.

Ask a tax adviser to get watertight advice.
 
#8
PBUH - yes it was my genuinely wifes main residence before we were married; improvements were funded by European money as part of a street by street improvement schemd through Penarth / S Glamorgan Councils - this is all documented. Unfortunately property in my wifes name only so that will limit offset - we plan to keep second house (in my name) as bolt hole if all goes wrong in UAE or children need to return to UK for schooling in the future

Thank you for your advice, M_D
 
#9
Get a generous valuation for it at the point it ceased to be main residence, supply as many subsequent improvement (value adding things not maintenance) bills as you can and take it from there.

Best of luck.
 
#13
Good luck.

Maybe post your experiences here for public info.

One of the problems is that it is very hard/impossible to get an accountant or solicitor to give a direct black and white answer about CGT. I think the issue is that, like many things with UK's benighted tax system, everything hinges on HMRC's interpretation of the situation. I spent a fortune on getting advice, but then came along the tales of MPs "flipping" their properties, etc - and this had not even been mentioned as a possibility by any of the four professional sources I had gone to!

I am in a similar position: I live in a crappy old house converted into four flats. One flat is my primary residence, and two others have accidentally become my buy-to-lets (had to buy out two neighbours because they wouldn't pay for repairs to a collapsing roof...). After years of trauma with this old building, we've got a developer interested in demolishing the place. Unfortunately, what little "profit" I might have got from the deal is likely to be consumed by CGT on the second and third properties.

The CGT at full whack is enough to partially fund my parents in care homes, or some other such major family expense. I don't feel inclined to hand it over for the State to piss away on its clients. Consequently, like many of the oppressed UK tax payers, I don't intend to hand it over without a fight.

After about three years and a couple of grand in fees, the only advice on CGT minimisation I have received boils down to:

(a) divorce your wife; kick out a tenant and let your ex-wife live in the property for a year or so. Best to have a messy divorce in a court so that HMRC are convinced. (This is because marriage is a crime in socialist UK; if you are unmarried it is far easier to avoid taxes....);

(b) be non-resident during the year of sale, and remain non-resident for five years - after which CGT liability lapses (apparently). This is complicated because HMRC are trying to move the goal posts on domicile and residency rules. One expat tax accountant even went as far as to say "don't even leave any household goods in storage in UK, and close any bank/email/telephone/etc accounts - in order to minimise any risk due to further changes in residency rules".


My wife and I have in fact left UK for an overseas expat position. Hopefully this will be our qualifying year, and we'll manage to (legally) keep out of HMRC's clutches...
 

walkyrie

Old-Salt
Book Reviewer
#14
(b) be non-resident during the year of sale, and remain non-resident for five years - after which CGT liability lapses (apparently).
I believe its only your UK CGT liabilty that lapses*. You would still (potentially) have a tax liabilty under the regime of whatever Country you now live in. But depending on the situation there's clearly alot more scheme of manouever.

To the OP - get a good accountant!


* - That's based on my experience with the double taxation treaties with Portugal and Australia. No idea about UAE.
 
#15
I believe its only your UK CGT liabilty that lapses*. You would still (potentially) have a tax liabilty under the regime of whatever Country you now live in. But depending on the situation there's clearly alot more scheme of manouever.

To the OP - get a good accountant!


* - That's based on my experience with the double taxation treaties with Portugal and Australia. No idea about UAE.
Some accountants do give black and white answers and help out.
You do not pay CGT for ...

you carried on all of your work or duties outside the UK.

So that included time in HM Forces.:)
 
#16
You have made the biggest mistake. Publishing your concerns. Your best bet would have been to just sell up seperately and keep the profit. Now half the world knows.
 

Gonzo33

Old-Salt
Book Reviewer
#17
The only bit of advice that I have been given by the HMRC recently is to look at form HF 283 on the website (it doesn't find it) and that the last 36 months are classed as residential and you also get 2 years letting relief. They also told me that as Mr Gonzo33 is armed forces that I *may* (me being in a similar position to you) be able to claim that due to his work we were not in a position to live in the property, and therefore had no choice but to let it.
 

Gonzo33

Old-Salt
Book Reviewer
#18
I found this on the HMRC website after a bit of searching. Don't know if it will be any use or not:

[h=3]Working away from home[/h] You'll still get the full relief if you couldn't live in your home because you were employed and either:

  • you carried on all of your work or duties outside the UK
  • the distance from work or the requirements of your job stopped you living at home - and you were absent for less than four years
The following must also apply:

  • the house was your only or main home both before and after you worked away
  • you were not entitled to Private Residence Relief on any other property during that time (see 'Owning more than one home' below if you're unsure)
If you can't return to live in the house because your job still requires you to work away, you'll get the full amount of relief.
 
#20
4(T) thanks for this; I have also heard of the 5 year rule and we have a combination of a) my wife living away from the property in Wales because I was required to live in work related accommodation in Wiltshire and Gloucestershire b) from Gloucestershire we moved to Oman and then UAE and are approaching 5 years out of UK. So a combination of these factors and the guidance in the sheet offered by Gonzo http://www.hmrc.gov.uk/helpsheets/hs283.pdf should see us covered.
Thanks again
M_D
 

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