Confusion on CGT from sale of property whilst overseas

[karen_sagar@hotmail.]

I bought my home in UK in August 1998 for £40k and spent about £11k improveing it. I lived in it from August 1998 to June 2000. I then rented it out until its sale in July/August 2002 and paid tax on the rental income. I left the UK in September 2000 and lived and worked in Hong Kong until my return in August 2002. Since then I live and work in Uk. I have had conflicting advice from the centre for non-residents about my CGT liability ranging from not liable to liable! Any clarification of the situation would be much appreciated as I am confused
many thanks

[accountant@uktaxshop]

Karen,

I dont think you are liable for CGT on this transaction.

Your non-residence is a red herring here. In general if you stay out of the country for 5 yrs there is no liability to CGT, but if your return (as you have within 5 years) you would be liable.

However as this property was you main residence for a period, the final 3 years are treated as if you where still living there, ie is exempt from CGT. The only cautionary note I have is there could be something which prevents this rule from operating as you where temporarily non-resident when you sold the house. However I am not aware of this.

Anyone else have any thoughts ?

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

[John Day]

I agree with James - the last 3 years of ownership is covered by the relief (section 223 (2)(a) TCGA 1992) applicable to private residences which when combined with the period 1998 to 2000 should safely mean there is no liability. This is even before one considers whether the period abroad constituted being "in employment" (for the purposes of sub-section 3(b)of the above section.

The disposal is still of course declarable on your 2003 tax return but in the knowledge that no capital gains tax liability is payable.

[karen_sagar@hotmail.]

James/John

many thanks for your informative and swift responses - I am much happier now and will look out for these clauses when completing my tax return.