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Where Taxpayers and Advisers Meet

Dual Resident CGT

nrg1
Posts:1
Joined:Wed May 01, 2019 3:47 pm
Dual Resident CGT

Postby nrg1 » Wed May 01, 2019 3:56 pm

Dear all

I have a query on the taxation of capital gains for a dual resident of the UK And Australia for a previous tax year.

I am satisfied that I am Dual Resident in both the UK and Australia for the 2017/18 tax year. Having read the double tax agreement, the tie breaker results in Australia coming out as my primary country.

So, I am UK resident, but UK treaty non-resident. I am also Australian resident and Australian treaty resident.

In 2017/18, I disposed of commercial (i.e. non-residential) UK property. Under the DTA, my reading of this as a treaty non-resident in the UK, article 13 states that the gain may be taxed in the UK.

Does this mean that I should have included the gain on my 2017/18 UK tax return, and claimed foreign tax credit relief on my Australian return? Or does my treaty non-residence extend to me be treated as non-resident for UK CGT purposes altogether?

Any help gratefully received!

Thanks

N

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Dual Resident CGT

Postby maths » Thu May 02, 2019 11:11 pm

In principle as a non-UK treaty resident any disposal of non-residential property situated in the UK is not subject to any UK CGT charge.

As however you were UK resident in the tax year of disposal a UK Tax Return should be completed with any claim being included in SA 109.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Dual Resident CGT

Postby AGoodman » Fri May 03, 2019 4:01 pm

maths - are you sure about that?

He is UK tax resident but treaty non-resident.
Art 13(1) seems pretty clear that the UK can levy tax on gains on UK land (without a resi/commercial distinction)

darthblingbling
Posts:698
Joined:Wed Aug 02, 2017 9:09 pm

Re: Dual Resident CGT

Postby darthblingbling » Fri May 03, 2019 6:29 pm

Treaty residency basically just tells you how to interpret the tax treaty in terms of contracting state and other state

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Dual Resident CGT

Postby maths » Sat May 04, 2019 12:37 am

AG
I prepared two draft responses at different times and I appear to have posted the short incomplete draft which reached the wrong conclusion.


Article 13(1) merely allows/permits the UK to levy UK CGT on disposals of UK real estate by a non-resident (including a dual resident whose dual residence is resolved in favour of the UK); it does not itself actually levy any such charge.

The sale is of UK real estate in 17/18 but commercial not residential. As a consequence, under UK domestic law a non-resident isn't subject to UK CGT.

However, under Article 13(9) it would seem that the UK are in fact able to levy UK CGT on residential or commercial property gains despite treaty non-residence where the gain arises in a tax year when under UK domestic law the vendor is UK resident.

alphajr
Posts:8
Joined:Fri Apr 08, 2011 5:31 pm

Re: Dual Resident CGT

Postby alphajr » Thu Aug 06, 2020 11:31 am

Sorry to drag up an old post being seems very specific
I am likely to be both us and U.K. resident for this year - left the us in late July and potentially spend the rest of the year (tax) in the UK
With my main home being the USA having lived there for 14 yrs

If I sell my UK residential property as a non resident I pay no capital gains per the rebasing method of value at year 2015 though if I am deemed resident I would pay a substantial capital gain having owned the property for 15years mostly rented so want to get it right

In summary would the U.K. still treat me as resident for capital gains this year ? Or no

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Dual Resident CGT

Postby AGoodman » Thu Aug 06, 2020 7:30 pm

1. Yes, if you arrive in the UK in July and remain here you will definitely be UK tax resident. One of the many tests for UK residence is spending 183 days here. See the Statutory Residence Test to confirm your exact position for this tax year. It may be possible to avoid this if you keep your time in the UK down but you will need to work through the Test.

2. You don't provide enough information to ascertain your treaty residence but it doesn't matter. The UK will always have the right to tax gains on UK land under the treaty.

The treaty will never render you non-UK resident under UK domestic law so you will never be liable to NRCGT, only regular CGT calculated on the normal method without rebasing.

The only solutions to get NRCGT treatment are: keep your days down to a level (the level may be 91, 121 or 183 days) where you are not UK tax resident OR don't sell until you have left the UK.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Dual Resident CGT

Postby maths » Fri Aug 07, 2020 10:14 am

If you remain in the UK from July 2020 to April 2021 you will be U.K. resident. This tax year is likely to be split into a period of non-residence ([possibly April to July) and a period of residence (July 2020 to April 2021). A sale post July will be as a UK resident unless you manage your time in U.K. to avoid residence.

DavidTreitel
Posts:271
Joined:Thu Aug 16, 2012 4:31 pm

Re: Dual Resident CGT

Postby DavidTreitel » Mon Aug 10, 2020 8:45 am

In practice the United States will charge tax on all of the gain (plus if there is a mortgage) on any foreign currency mortgage gain. Owing some amount of UK CGT on the gain from April 2015 would be a moot point as the United States will give a credit for the UK CGT. Even owing a larger amount of CGT to the UK may not be material. You'll want to work through the numbers including recaptured depreciation etc in the US.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Dual Resident CGT

Postby maths » Mon Aug 10, 2020 9:01 am

Assuming dual residence and a resolution under the DTA in favour of the UK, any US tax payable will be creditable against any UK tax charge.


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