Free Flat for Parent

bettyturner1@hotmail · Postby **bettyturner1@hotmail** » Mon Aug 11, 2003 7:12 am

My American husband & I own a home and have been resident in US since 1984. In 1990 we redeemed my aged parents' mortgage for a flat they had just bought on a 'roll-up' scheme, with no savings, no deposit etc. at enormous interest rates. They lived rent free from 1990 to present and the flat has appreciated substantially.
When we sell the flat in the future, will we be subject to CGT as we have never lived there? In that event, should we become UK resident for some years and claim it as a main residence on our tax form or can we claim for a dependant relative living there? We pay US taxes but no UK taxes.
Thank you for your help.
Sincerely,
Betty Turner

accountant@uktaxshop · Postby **accountant@uktaxshop** » Mon Aug 11, 2003 7:42 am

Betty,

As you have been resident in the US since 1984, you should have no CGT due on the eventual sale. You need to be non-UK resident for 5 tax years for this to apply. However I am not sure what the position is in the US regarding your worldwide property, it would be worth taking some professional advice locally on this issue.

If you do become UK resident, living in the flat will help reduce (but not remove) your liability to CGT. It may be better to sell the property whilst being overseas, and buy another. Alternately there is a trust route available if you do not wish to sell and your parents remain in the flat. The "dependant relative" route is also an option.

I suggest you take advice prior to any future return to the UK to look at your affairs as a whole at that time.

Regards

James Smith
Chartered Accountant
www.uktaxshop.co.uk
01284 764436

Taxbar · Postby **Taxbar** » Tue Aug 12, 2003 2:52 am

Dear Betty,

May I clarify a few issues for you.

Firstly, you are not liable for any UK Capital Gains as you have been resident in the US.

I presume that you are either a US citizen or a green card holder and are therefore liable for US taxes on all your income and gains wheever you live.

Since you have no UK liability,returning here offers no advantage.

You are however liable to US capital gains tax at either 15% or 20% depending on your income tax level.

You really need to seek US tax advice on this issue. A US advisor would probably want to confer with a UK advisor to confirm the UK tax position.

Once that was done he could then advise on Any US planning or claculate the US Capital Gains liablity. There are a number of exemptions and it may be possible to apply a one time exemption to the gain depending on your other assets and plans.

If you can tell me which state you live in and what sort of sum roughly is involved, I may be able to recommend soneone local to you.

Daniel Feingold
UK & International Tax Law section editor this website.
e-mail: sedrate@easynet.co.uk