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Where Taxpayers and Advisers Meet

NRCGT

Brightonian
Posts: 112
Joined: Wed Aug 06, 2008 3:31 pm

NRCGT

Postby Brightonian » Wed Apr 12, 2017 11:00 am

I have a client who was non resident from September 2010 until 1 April 2017. In August 2010, he and his wife bought a London flat with 67 years remaining on the lease. This was intended as their PPR. The following month, my client went to work full-time abroad, which he has done until earlier this month - he has been living in employer-provided accommodation the whole time. At some point he and his wife separated - probably during 2010/11 or the following tax year. They continued to own the flat jointly.
They have now put it on the market. It has been her PPR throughout, so she has no CGT liability. He has only occupied the property a few times since leaving to work abroad - on occasional visits back to the UK before the decree nisi in 2013.
He is now wondering if he should seek another job abroad and sell the property while again non resident. If he stays in the UK, he is unlikely to be able to reoccupy the property and benefit from what used to be ESC D4.
I have two questions. If he takes another job abroad and NRCGT applies, can he claim ESC D4 against the non resident gain? Presumably he can't claim this if he just spends a year travelling abroad? Also, for resident t CGT, can he claim any of his wife's period of occupation before separation to increase his period of PPR? Thank you.

maths
Posts: 8033
Joined: Wed Aug 06, 2008 3:25 pm

Re: NRCGT

Postby maths » Wed Apr 12, 2017 1:37 pm

IF the property qualified as the client's principle private residence at any time in his period of ownership and a sale is effected whilst he is non-UK resident then the last 18 months of ownership will be exempt from CGT (whether he occupied during that period or not).

If a sale is effected say 5 October 2017 and the default method of computation is adopted then the gain is the difference between market value at 6.4.15 (MV) and sale proceeds as at 5.10.17 (SP).

G = SP - MV

Exempt gain = 18/30 x G

Taxable gain = [12/30 x G] - AE

This may be the easiest approach and the CGT charge acceptable (depending upon the numbers).

Brightonian
Posts: 112
Joined: Wed Aug 06, 2008 3:31 pm

Re: NRCGT

Postby Brightonian » Wed Apr 12, 2017 3:57 pm

Thank you for your help. Having looked at the numbers, I agree that this is the easiest approach and also the best in terms of tax unless he can either reoccupy the property - difficult with his ex-wife living there - or else take a job in (say) Edinburgh and avail himself of the ESC D4. If he were resident in the year of sale, however, and unable to either reoccupy or use D4, could he use part of his ex-wife's period of occupation (prior to their separation) to increase the amount of exempt gain? I am scratching my head over this one, as I have never encountered this combination of PPR, overseas employment and marital breakdown before! Thank you very much for explaining how PPR and NRCGT overlap.

maths
Posts: 8033
Joined: Wed Aug 06, 2008 3:25 pm

Re: NRCGT

Postby maths » Wed Apr 12, 2017 6:07 pm

If he intended to have the flat as his only or main residence and thus intended to occupy it but was required to live in job related accommodation then private residence relief should apply without any need to re-occupy the flat.

See TCGA 1992 s222(8) which is different from s223(3).


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