Confusion on CGT calc for a usufruct / bare property recently sold in Italy

[cliff87]

Hi

Hoping someone can help shed some light on how to calculate the correct amount of CGT we have to pay on a property recently sold in Italy .

My Italian wife who is a UK tax resident has recently sold a property in which she was the bare(nuda) owner and her mother the usufruct. As her mother is 69 , the split of the sale price was 45% to her mother and 55% to her. ( this link shows how this is calculated "http://www.ortalloggi.com/en/what-is-the-usufruct-and-how-is-it-calculated-for-italian-law/" ) .

As my wife lives in the UK she will have to pay capital gains tax on her portion, however i am unable to find anywhere information on what % split we should use on the purchase price of the property which was in Dec 2003. Should we apply the same split , or is there an assumption that the bare owner is the full owner from a purchase view? The only information i have found from many hours of searching is an article giving a similar example in France ( https://www.russell-cooke.co.uk/media/1505/usufructs-part-1-uk-capital-gains-tax-private-client-business-issue-5-oct-2011.pdf ) where they state that for UK CGT it would be easiest to use the same split on the purchase price to derive the CGT due as if the split changes through out the period of ownership , you would have to try and work out the value of the property at points in time which retrospectively would be impossible to find out.

Any help in this matter would be greatly appreciated !

Kind Regards

[jerome.lane]

For CGT purposes, an usufruct over property is treeated as inmovable property (and not treated as a Trust arrangement as it would be for IHT purposes).

http://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/498371/italy-dtc_-_in_force.pdf

You would need to apply the part disposal rules to the 45% received, with the base cost being 45% of the open market value when the usufruct was put in place (which might be different to the purchase price).

[cliff87]

Hi ,

Thank you very much for the quick reply , greatly appreciated. The usufruct was put in place as part of the original purchase of the property in 2003 and is in the purchase contract . Therefore based on the below , it sounds like it should be a simple calculation of using the same % ( 55% for her ) on the original purchase price to calculate the capital gain and then using FX rates of EUR/GDP on purchase and sale price to convert to GDP?

Kind Regards

[jerome.lane]

Sounds right to me!

[cliff87]

Thank you once again for your help in this matter , really appreciated!