Foreign Property Tax

[sumannag25]

Hello all,

I migrated to the UK from India in 2012 and have now become a British citizen. I work full time and have been a regular taxpayer since then. I am the only child of my parents and father passed away recently. I have inherited our only home in India from my father (my mother passed away in 2015). I know that there is no Inheritance tax implication in India. However, if I now sell the inherited property in India, is there any IHT and/or GCT implications in the UK? Is there any way of legitimate mean of avoiding this tax? Looking forward to having some advice.

Thanks

[AGoodman]

There is a possibility of capital gains tax if you sell the property for more than its market value when your father passed away. Any gain (increase) would be subject to capital gains tax which is currently 18/28% (basic/higher rate) after the £12,000 exemption.
No UK inheritance tax implications of inheriting or selling.

No worthwhile way around it. You could elect for the remittance basis but:

(a) that only defers the tax until you bring the proceeds to the UK
(b) you lose your income tax and CGT personal allowances for the year; and
(c) it would likely cost you £30,000 for the privilege as you've been UK resident for 7 years (it applies if you were UK resident for all or part of the prior 7 tax years).

[sumannag25]

Hello AGoodman,

Many thanks for your reply and I am able to understand what you have explained just now. However, I would like to add on a couple of points that I didn't mention previously.

1. I have found out that I will have to pay CGT in India, so will I get any relief under the Dual Tax Agreement between India and UK?

2. Ever since I am in the UK, I have always been living in a rented property and have never bought any home whether in UK or in India. The property I am inheriting will be the only home in my name, once the transfer has taken place. But, as you can understand that I will have to sell the property as I will not be returning to India permanently. But because of the current COVID situation, I am not in a position to travel to India in the near future and that will remain the case until the COVID situation settles down. However, once the situation is normal and I sell the property say for example after 2 years from now, will I be liable for CGT in the UK?

Many thanks for your time and I look forward to hearing from you.

All the best