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Where Taxpayers and Advisers Meet

CGT disposal foreign property with usufruct

jm_13796
Posts:2
Joined:Mon May 20, 2024 10:20 pm
CGT disposal foreign property with usufruct

Postby jm_13796 » Mon May 20, 2024 11:26 pm

Hi all,

Can anyone please advise me on this?

A portuguese parent (no connection to the UK) buys a house in Portugal pre-2006 as the legal guardian of their child. The infant is gifted the bare ownership and the parent retains Usufruct over the property (i.e. is the beneficiary). As an adult the bare owner permanently lives and works in the UK. The share of ownership was discriminated in the deed at time of purchase in accordance to portuguese law - around 0.6 to the usufructuary, 0.4 to the bare owner.

If the house is sold this fiscal year, my understanding is that the bare owner is only liable for CGT on their percentage of the property, as discriminated in the deed.

As an e.g. if the property had been acquired for 10.000 euros, and now sold for 100.000 euros, ignoring any allowable discounts and the exchange rate, by my estimates the CGT due HMRC would be (100 - 10)K * 0.4 * 0.24 = 8640 euros.

Is this correct?

Thank you for your help on this

Jholm
Posts:386
Joined:Mon Mar 11, 2019 4:22 pm

Re: CGT disposal foreign property with usufruct

Postby Jholm » Tue May 21, 2024 4:27 pm

Seems reasonable on the info provided.

The bare owner may be entitled to private residence relief if they've been occupying it for a period of time as their main residence.

jm_13796
Posts:2
Joined:Mon May 20, 2024 10:20 pm

Re: CGT disposal foreign property with usufruct

Postby jm_13796 » Tue May 21, 2024 8:40 pm

Perfect, thank you. The house was never a main residence so the relief wouldn't apply in this case, but thank you for pointing it out!

I would also like to ask how the conversion to GBP is done. Do I need to consider the ongoing exchange rate for both the value of acquisition and disposal? Is it acceptable to use a past exchange rate for the value of acquisition? This is complicated by the fact the acquisition was done in the obsolete pre-Euro portuguese currency, the escudo.

Jholm
Posts:386
Joined:Mon Mar 11, 2019 4:22 pm

Re: CGT disposal foreign property with usufruct

Postby Jholm » Wed May 22, 2024 8:47 am

I would generally use the rate at acquisition and the rate at sale. xe.com is a good website for this. However, you may prefer to use HMRC yearly averages, which they publish online.


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