PR election with UK and overseas properties

[sandsy]

My husband and i bought a property here in the UK in 1994 and lived in it for 2 years.
In 1996, we moved overseas to Australia to work for a subsidiary of our employer. The UK property was let out pretty much continuously until we returned to the UK (2006).
In 1999, we moved countries to South Africa and changed employers.
In 2001, we bought a property in South Africa and lived in it for 5 years.
In 2006, we returned to the UK and lived briefly in the UK property but had to move away due to work commitments to rent elsewhere. The UK property was sold later in 2006.
In 2007, we sold the South African property.
Later in 2007, we bought a new property with the proceeds of both sales.

At no time, did we make any elections of primary residence to HMRC. And we haven't completed any tax returns yet

How will our CGT work? Will we pay CGT on both the UK and SA properties (given that the latter was sold only after we became UK residents again)? We lived in the SA property for longer - can we retrospectively elect this as our PR?

Thanks.

[TN]

You need to look at the two properties separately:

On the SA property, you lived in it for 5 of the six years. The last 36 months are deemed to be a period of residence, so the total gain should be exempt.

On the UK property you lived in it for the first 2 of the thirteen years of ownership. The last 36 months will be deemed to be a period of residence. The interim period between 1996 and 2006 should be treated as deemed residence if the duties of your employment were fully outside the UK, and you lived in the property as a PPR after you returned to the UK. If you didn't get that exemption then you would get letting relief up to £40k of the gain.

So it looks to me like you probably haven't got any tax to pay on the sales of the properties.

Did you declare the rental income that you earned on your UK property on your UK tax return?

[sandsy]

Did you declare the rental income that you earned on your UK property on your UK tax return?

Once the expenses were offset against the rental income, and it was shared between both my husband and myself, our UK income was below the personal tax limit so we never filled in UK tax forms. Is that right?

[TN]

Technically, the obligation to deduct tax would have rested with the tenant or the agent, unless you registered under the non-resident's landlord scheme. If the rental profit was below your personal allowances then I think i'd let sleeping dogs lie.

[sandsy]

We were registered under the non-resident landlord's scheme so received all our rental gross.

Thanks for your help

[Peter D]

http://www.hmrc.gov.uk/manuals/cg4manual/cg65046.htm
But start at 65030 and read all the pages. The problem is that you purchased another residence which voided your absence period on your UK property so it may only attract 36 months PPR. Registering as an NRL requires you complete a UK SATR annually to declare the rental profit or loss and all you other UK icome from savings and investments. Not reporting this may preclude you from claiming Letting Relief of up to £40,000 per owner. However I have had clients notify HMRC of there error and produce SATR 's for the missing years without penalty as there was no profit as such and LR was granted. Further, if you were granted PPR absence on the UK property you would be liable to CGT on the SA property as you can not have two PPR's. Whether HMR will pick up on this is doubtful particualrtly as the other residence was out of the UK. However not filing SATR's will have put a paper clip of your file ( old expression ) and they may ask you to explain the circumstances and demand retrospective SATR's. Regards Peter

[Peter D]

Lets have some dates at least MM/YYYY and acquisition and sale vlaues and any associates legal and sales costs and I'll run the numbers for you and the scenarios. Regards Peter