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Where Taxpayers and Advisers Meet

CGT in UK on sale of Overseas property

stum
Posts:5
Joined:Fri Mar 24, 2023 9:34 am
CGT in UK on sale of Overseas property

Postby stum » Fri Mar 24, 2023 10:04 am

I am a retired British cItizen.
I took residency, both tax and normal resident of Portugal, to avoid Brexit problems with the 90/180 day ruling. That was in Dec 2020.
I own a property in both UK and Portugal.
None of the properties have ever been rented out. The UK property was my main home until I set up in Portugal, which I now consider to be my main home, as I spend more time there than in UK
As my income is only from UK OAPension, I never filed a tax return in the UK, as the total is below Tax free allowance (for the moment)
I am registered on UK tax system with my UK property address.
I now spend between 8 and 9 months in Portugal, returning to the empty but furnished UK flat for up to 3 months each year (summer only).
The question is, if I sell the Portuguese property and reinvest in a cheaper property in Portugal (using funds from the sale), do I need to inform HMRC ?
In Portugal Capital gain tax is due on the sale of all property, unless you reinvest MORE than the full sale value of the first property, that includes a main home.
So in my case I would be paying tax on the deal in Portugal.
The only tie I have in the UK is the property
Any help appreciated

pawncob
Posts:5083
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: CGT in UK on sale of Overseas property

Postby pawncob » Fri Mar 24, 2023 12:10 pm

You are resident in Portugal, and probably domiciled there as well (but retaining a UK property causes some doubt).
As far as UK taxes are concerned there is no change, you're simply changing address in Portugal.
With a pinch of salt take what I say, but don't exceed your RDA

stum
Posts:5
Joined:Fri Mar 24, 2023 9:34 am

Re: CGT in UK on sale of Overseas property

Postby stum » Fri Mar 24, 2023 6:58 pm

Thanks for the reply.
I take it from that, that you would not think it necessary to inform HMRC?
Indeed that is what I would have thought. Portugal Taxman, considering I am a resident there, would have no reason to even mention this to UK, as they have no idea that I have a property in the UK.
Of course it could be a different matter when I ultimately sell up in Portugal and return to the UK (unless Uk has rejoined the EU in some capacity by then, in which case the reinvestment route would become available in the UK, as it was until we left the EU, now you can only reinvest in any EU country.

wamstax
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Location:Operate Nationally but based in Aberdeen
Contact:

Re: CGT in UK on sale of Overseas property

Postby wamstax » Fri Mar 24, 2023 9:45 pm

There is a lot of doubt about your domicile as clearly you intend to return to the U.K. at some time and have retained a U.K. property to escape the summer heat in Portugal
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact (mob 07751720507) can be obtained from websites

stum
Posts:5
Joined:Fri Mar 24, 2023 9:34 am

Re: CGT in UK on sale of Overseas property

Postby stum » Sat Mar 25, 2023 4:53 am

Thanks again fro the reply.
Well I checked my residency status for last year as an example, using online Gov.UK residency webpages and it says I was not resident in UK (mainly insufficient ties).
Domicile is a different matter I suppose, but in any event I consider the Overseas house to be my main house (PPR) and as such is it not free of capital gain tax in the UK?
For example you cannot be a resident in PT without spending at least 183 days in the country, and for that reason I pay income tax in PT as there is no lower limit threshold for income tax..ie I have a Residency card to show I am PT resident, taken out under Brexit Withdrawal rules...ie Before Brexit deadline of Dec 2020...

I assume the reason for the minimum stay in PT of 183 days per year, for someone that is not a PT citizen (ie born in Pt and a PT passport holder), is that otherwise you could have residency (which allows you to stay in PT for as long as you want), but declare yourself to be NON resident for tax purposes......that would be even nicer if I could do that.[/i]

bd6759
Posts:4239
Joined:Sat Feb 01, 2014 3:26 pm

Re: CGT in UK on sale of Overseas property

Postby bd6759 » Sat Mar 25, 2023 12:22 pm

The PPR exemption only applies for the period it was your main residence. Its status when you sell it is not wholly determinative. Any relief will be time apportioned.

Surprised that the “insufficient ties” test makes you non-resident given what you have said, but clearly insufficient information here.

stum
Posts:5
Joined:Fri Mar 24, 2023 9:34 am

Re: CGT in UK on sale of Overseas property

Postby stum » Sun Mar 26, 2023 10:24 am

The PPR exemption only applies for the period it was your main residence. Its status when you sell it is not wholly determinative. Any relief will be time apportioned.

Surprised that the “insufficient ties” test makes you non-resident given what you have said, but clearly insufficient information here.
I actually built the property starting as non resident of PT, in 2017. Bought land, designed applied for licence to build, and employed local builder to do the works.
All done and finished end 2019. I moved in then, although due to Covid lockdown, the house could not be reviewed by the Local Council to give its official existence.
But that was given at the start of 2021, making it all legal and correct. I am the only person to live in the house and have lived in it since start 2021.
In filling in the Gov webpage I mentioned being in UK for only 88 days, but all other info as said here.
Surely in any event, as this is where I spend most of my time, the fact that I have a property and car in the UK, with no real ties (property and car are just objects easily sold)
I could show things like electricity usage in UK to be almost nothing, as I am only there in summer. Flight records would also be available to show my time in UK in any year.

Hayes Accountants & Tax Consultants
Posts:7
Joined:Fri Mar 17, 2023 8:02 am

Re: CGT in UK on sale of Overseas property

Postby Hayes Accountants & Tax Consultants » Mon Mar 27, 2023 6:42 am

As a retired British citizen who is resident in Portugal and only receives income from a UK OAPension, you should review your tax obligations with respect to the sale of your Portuguese property and the purchase of a new property in Portugal.

Under UK tax law, if you are resident in the UK for tax purposes, you may be liable to pay UK tax on any income or gains arising from the sale of your property, regardless of where the property is located. However, since you are currently a tax resident of Portugal, you would not be liable to UK capital gains tax on the sale of your Portuguese property.

It is important to note that, even if you are not required to file a UK tax return, you still have an obligation to notify HMRC of any chargeable gains you have made, and you must do so within 30 days of the sale. Failure to do so could result in penalties and interest charges.

In terms of reinvesting the proceeds of the sale in a cheaper property in Portugal, you should be aware that the reinvestment rules for capital gains tax in Portugal are different from those in the UK. You have mentioned that you would be liable to pay capital gains tax in Portugal on the sale of your property, unless you reinvest MORE than the full sale value of the first property. Therefore, it is important that you carefully consider the reinvestment rules in Portugal and seek professional advice if necessary.

Overall, while you may not be liable to UK capital gains tax on the sale of your Portuguese property, you should still notify HMRC of the transaction within 30 days of the sale. Additionally, you should review the Portuguese tax rules for capital gains tax on the sale of a property and the reinvestment rules to ensure that you comply with all applicable regulations.
If you need professional guidance you can seek help from Hayes Accountants.

stum
Posts:5
Joined:Fri Mar 24, 2023 9:34 am

Re: CGT in UK on sale of Overseas property

Postby stum » Mon Mar 27, 2023 1:42 pm

As a retired British citizen who is resident in Portugal and only receives income from a UK OAPension, you should review your tax obligations with respect to the sale of your Portuguese property and the purchase of a new property in Portugal.

Under UK tax law, if you are resident in the UK for tax purposes, you may be liable to pay UK tax on any income or gains arising from the sale of your property, regardless of where the property is located. However, since you are currently a tax resident of Portugal, you would not be liable to UK capital gains tax on the sale of your Portuguese property.

But surely there is something called PPR in UK, and my guess is that I could simply change address, currently the UK property, to the Portuguese one? In which case there would be zero tax implications when I sell it?

It is important to note that, even if you are not required to file a UK tax return, you still have an obligation to notify HMRC of any chargeable gains you have made, and you must do so within 30 days of the sale. Failure to do so could result in penalties and interest charges.

But if any proceeds of sale never left Portugal, given that UK Gov consider me as non resident in UK (providing I do the same in respect of time spent in UK), how can I be a tax resident?
Is this simply because I own a property in the UK?


In terms of reinvesting the proceeds of the sale in a cheaper property in Portugal, you should be aware that the reinvestment rules for capital gains tax in Portugal are different from those in the UK. You have mentioned that you would be liable to pay capital gains tax in Portugal on the sale of your property, unless you reinvest MORE than the full sale value of the first property. Therefore, it is important that you carefully consider the reinvestment rules in Portugal and seek professional advice if necessary.

Well the main reason for selling is to free up some capital. SO I would not reinvest 100% of proceeds of sale but probably more like 75%, but in the figures thagt means I would pay CGT on 50% of 25% (100-75%), thems the rules in PT for sale of MAIN home. But of course if the UK wanted me to pay CGT at UK rates it would be payable on 100% of any gain, meaning that I would then not have enough money to reinvest 75% of the sale value......
In addition I would have to keep the new property as my main property for 3 years, before selling it (from time of change of address at Taxman) or I could be accused of evading CGT on the original sale.

Overall, while you may not be liable to UK capital gains tax on the sale of your Portuguese property, you should still notify HMRC of the transaction within 30 days of the sale. Additionally, you should review the Portuguese tax rules for capital gains tax on the sale of a property and the reinvestment rules to ensure that you comply with all applicable regulations.
If you need professional guidance you can seek help from Hayes Accountants.


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