This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

CGT on foreign home

maree
Posts: 2
Joined: Sat Jan 24, 2015 11:16 pm

CGT on foreign home

Postby maree » Sat Jan 24, 2015 11:31 pm

Hi

As an Australian I bought a house in there in 2000 for £60k, lived in it until 2002 and then when I moved to UK to work, rented it out.
I intended to return to Aus and live in the house. However, in the last few years a change in personal circumstances means that it is likely I will stay in the UK. I have been resident for a number of years and am now a British citizen.

The house is now worth probably around £260k. If I sell the house I assume I am liable for CGT on the gain. Having does some cursory reading it seems that of the overall 15 year period I have owned the house I can claim an exemption for 5 years (2 years living plus an additional 3 years). So the liability will be (260-60)*10/15 or around 133k. Can I also claim a £40k letting relief, in addition to the normal £11k CGT limit to reduce the taxable gain to £82k? I will also have to pay CGT in Australia (though a smaller amount) so is there double taxation relief?

Finally is there any way of reducing these tax liabilities? It seems each year the liability will rise as the the number of rental years increases (so next year it will be £137ks since 11/16 rather than 10/16) which is more than my net rent on the property after all costs/tax etc.

Thanks

GlobalTaxAdviser
Posts: 633
Joined: Fri Dec 05, 2014 1:18 am

Re: CGT on foreign home

Postby GlobalTaxAdviser » Mon Jan 26, 2015 2:34 am

Hi

A few pointers

PPR is available for non UK properties so you can get relief for an additional 18 months not 36 months

If you are non domiciled then the gain will be taxed on a remittance or arising basis

There is double tax relief where you can get a credit against the double tax which is payable in both Australia and UK. The Tie breaker will determine your primary country of residence

Please note the tax calculation for the property in relation to income and capital gains may be different as some costs may not be allowable for deduction hence you may get a different tax figure in UK and Australia. I assume you are declaring the rental profits on the property if more than 2K a year ?

Tax may increase each year but hopefully the price of the property will increase too !

There maybe ways to reducing the taxable gain and considering the number of variables involved I would suggest you book a appointment with an accountant (both UK and Australia)

Kind Regards

Sash

maree
Posts: 2
Joined: Sat Jan 24, 2015 11:16 pm

Re: CGT on foreign home

Postby maree » Mon Jan 26, 2015 7:56 pm

Thanks very munch for the reply.
I did not realize the 3 year rule was now just an 18m rule ... even more CGT to pay!
At this point I am a UK resident, and not resident in Australia, so non-dom rules don't apply.

Could I stop renting it out and define it as my main residence (I own a house in the UK now)? The problem is that I really need to sell it since the rental income is almost negligible (it a small bungalow on a large plot). If I was in Aus I would just build 2 x 4 bed houses on it but doing a development project from UK would be a disaster.

Wish I'd never rented it out but I didn't know then that I'd be living in the UK. The Aus CGT tax bill is only about £10k by comparison since their rules are far more favourable and allow me to pay CGT only of the increase in value from 2009 given their 7 year grace period.

GlobalTaxAdviser
Posts: 633
Joined: Fri Dec 05, 2014 1:18 am

Re: CGT on foreign home

Postby GlobalTaxAdviser » Mon Jan 26, 2015 10:18 pm

The problem with nominating the Australian home has your main residence is that you are living in a house in the UK which technically is your main residence


Return to “Capital Gains Tax, CGT”