CGT on disposal whilst overseas

[dualie]

I purchased a property in the UK in August 98 for 110,000 pounds. I was resident in the property for just less than 1 month before renting it out, a sitaution that continued until the sale. I purchased the property with a view to it being my principal residence, but circumstances changed.

I sold the property in January 2003 for 184,000 pounds. It was therefore let for all but approx 1 month of this period.

To complicate matters I moved and worked overseas on the 15th October 2000, returning on the 9th February 2003.

I would appreciate a rough idea of what my CGT liability would be, and any reliefs that may be applicable. Does it make a difference because the disposal was made while I was overseas and not resident for tax purposes?

Thanks very much in advance.

[Nigel Lord]

dualie

The answer depends on whether you were genuinely resident for the first month of ownership. If this is challenged by the Inland Revenue, the onus would be on you to prove residence rather than on the Inspector to prove otherwise.

If you were resident (and the property was your only main residence) you would be entitled to Principal Private Residence (PPR) Relief for the period of residence, and for the last 36 months of ownership. You would also ne entitled to Residential Lettings Relief.

This would give a computation as follows:

Proceeds £184,000
Less:
Cost (110,000)
PPR Relief
(37/54) (56,703)
Lettings
Relief (23,297)

Taxable Gain NIL

Your non-residence probably does not affect the position as you would have remained ordinarily resident in the UK having spent less than 5 tax years as non-resident. However, this may be overridden by the double tax treaty between the UK and the jurisdiction where you were resident. (Please advise.)

Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10 4PE
020 8418 9101 & 07769 931852
mail@lordassociates.co.uk

[dualie]

Thank you for your answer.

The situation for the first month residency is a concern, as the only proof I really have is a council tax bill (that's all I can find so far anyway). I was in rented accomodation prior to the purchase, and wanted to move into my new house and sub-let my rented one as I still had a considerable term on the lease to see out. Was initially advised by the landlord and agent they wouldn't mind, but then they changed their mind. So I moved back to the rented place, and rented my newly purchased house. The view there was to wait until both my tenancy was on a 1 month notice, and so were my own tenants in my new house (2 months), then I could move into my new home without wasting money on property I wasn't actually living in. Circumstances changed (don't they always!) and I ended up keeping my own propery rented out.

What would the tax situation be if the Revenue refuted the residency? It's annoying as I genuinely bought the place to be my main residence. This is a big concern given the situation with the rented place.

I was in Singapore for my period outside the UK.

Thanks once again for your valuable advice.

[Nigel Lord]

dualie

The council tax bill helps the situation. If you could obtain documentary eveidence of you circumstances (e.g. a letter from your landlord) this would help further. It depends on your adverseness to risk.

Without PPR Relief the position is:

Proceeds £184,000
Less:
Cost (110,000)
Taper Relief
(10%) (7,400)
Annual exemption (if unused)(7,900)

Taxable Gain £58,700.

The gain will be taxable at your highest rates of income tax. If all the gain is taxable at 40% you will have a liability of £23,480!

Please refer to me if you need further assistance in reporting the gain.

Nigel Lord

020 8418 9101 & 07769 931852
mail@lordassociates.co.uk

[dualie]

Thanks very much Nigel. I will contact you if I need further help and advice.

Regards