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Where Taxpayers and Advisers Meet

CGT for Non Residents

khalid
Posts: 9
Joined: Tue Nov 01, 2011 3:18 pm

CGT for Non Residents

Postby khalid » Sun Feb 15, 2015 12:41 am

My son is a USA & UK national. Resident in USA for more than 10 years. He will become resident in UK from 2015-16 onwards. If he transfers his UK property to a Limited Company before 5th April 2015, will CGT be avoided ?

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

Re: CGT for Non Residents

Postby GlobalTaxAdviser » Sun Feb 15, 2015 7:26 pm

That should be fine avoiding CGT but there could be stamp duty, legal and mortgage fees to contend with and maybe even higher interest rates

While transferring a property to a limited company as its advantages, there are also many disadvantages to consider and would take advice before transferring a property to a limited company

khalid
Posts: 9
Joined: Tue Nov 01, 2011 3:18 pm

Re: CGT for Non Residents

Postby khalid » Mon Feb 16, 2015 7:42 pm

Thank you for your advice. I want to be sure that the current price will become the base price for future sale i.e. the Limited Company will pay CGT on the future gains only.

Ian McTernan CTA
Posts: 1232
Joined: Wed Aug 06, 2008 3:02 pm
Location: Bedford
Contact:

Re: CGT for Non Residents

Postby Ian McTernan CTA » Thu Feb 19, 2015 4:17 pm

Will he be residing in the UK property when he becomes UK resident?
McTernan Associates Ltd
Chartered Tax Advisers
Bedford
Email through link on website:
http://www.imcternan.com

khalid
Posts: 9
Joined: Tue Nov 01, 2011 3:18 pm

Re: CGT for Non Residents

Postby khalid » Sat Feb 21, 2015 12:02 am

I want to be sure of all possibilities:
1. It is investment property for letting. He is not likely to reside in this flat.
2. He may or may not stay in UK permanently.

maths
Posts: 7586
Joined: Wed Aug 06, 2008 3:25 pm

Re: CGT for Non Residents

Postby maths » Sun Feb 22, 2015 6:06 pm

What is the value of the property?

Are there any borrowings secured agains it?

Is he domiciled in the UK or not?

khalid
Posts: 9
Joined: Tue Nov 01, 2011 3:18 pm

Re: CGT for Non Residents

Postby khalid » Mon Feb 23, 2015 12:06 am

Property value is £230,000-
There are no borrowings.
He is domiciled in UK

DavidTreitel
Posts: 206
Joined: Thu Aug 16, 2012 4:31 pm

Re: CGT for Non Residents

Postby DavidTreitel » Sat Mar 07, 2015 10:43 am

So currently your son is US resident and a US citizen. He reports the rental income and expenses on his annual US return and if there are losses he is potentially setting these against his other income (subject to passive activity loss limitation rules).

You are thinking that he should create a Controlled Foreign Company; and potentially find himself within Subpart F on the income in future. This will not avoid US income tax on the growth in value when the property is sold, so I am not sure that I understand the advantage for your son. I can see a potential advantage for his accountants, because the new company will have annual UK and US accounting fees to be paid; so the accountants will win here; but this seems poor tax planning as it would save no tax at all unless UK tax rates on the eventual gain were to be significantly greater than US rates.


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