relocating to Poland - what tax will I pay ?

[AngloPol]

I am considering relocating to Poland (probably Warsaw or Krakow) with my family.

I intend to sell my principal residence and possibly a property I let.
I have had the property which I let for over 10yrs and if I sell as a UK resident i would have considerable Capital Gains to pay.
Would anyone know the tax implications if I were to sell this property as a resident in Poland ? The value of this property is about £900000, and the value 10 yrs ago was in the region of £250000

Would it be best to sell my principal residence (valued at around £800000) whilst still a UK resident, before moving to Poland ?

Thanks in advance

[cranleys]

AngloPol

Your rental property woulf currently attract CGT. The exactly amount of the Gain of £650,000 will be Subject to Taper Relief at 30% (assume sold on 18 March 2005) so a gain of £455,000 will be payable at 40%, so £182,000.

CGT is payable on an individual who is Resident or Ordinary Resident in the UK.

If an individual goes abroad for a period of less than 5 years and then returns to the UK, there may be a CGT on disposals made during the period abroad.

As a UK Domicile you are subject to CGT on all your assets worldwide.

Always available to assist.

Colin Davison
colin.davison@cranleys.co.uk

Editor - Property Tax Secrets 2005

Cranleys Chartered Accountants
01256-766655
07766-714000

[Lambs]

AngloPol, please make sure that you are adequately advised with regard to Polish Capital Gains Tax, (or its equivalent), presuming there is one, BEFORE YOU SELL ANYTHING OR LEAVE THE UK.

Looking at UK tax in isolation, you are right to consider selling your current residence in the UK first - note that the last three years of ownership are always deemed to be occupied as main residence, so you can have up to three years to sell it after you leave and it should still qualify as wholly exempt.

However, as cranleys points out, if you are neithr resident nor ordinarily resident in the UK for 5 complete tax years, then the disposal of UK assets will not render you liable to UK CGT. (Polish CGT is of course another matter).

May I refer you to the Inland Revenue's very helpful guide book:

http://www.inlandrevenue.gov.uk/pdfs/ir20.pdf

which offers further advice on this and related matters.

However, bearing in mind the substantial value attached to these assets alone, I should recommend you obtain professional guidance well in advance of your intended emigration.

[Taxbar]

As a guide only and you will need specific advice.

If you sell a property owned for more than 5 years it may be exempt from Polish CGT.

The main rate is 19% CGT and income tax is at up to 50% from January.

You must sell in the UK tax year following departure to avoid UK CGT on the investment property.

Daniel Feingold
Strategic Tax Planning
info@stratax.co.uk

[Lambs]

I personally favour making use of the UK PPR exemption whilst it should still be available at 100%, and probably prior to leaving, on the ASSUMPTION that Polish CGT, like UK CGT, will leave overseas disposals made prior to taking up residence, well alone. Why run the risk of its being caught by an overseas tax regime when there are sufficient local reliefs to kill off the charge right now? I say this in complete ignorance of the Polish tax regime, I should add.

[AngloPol]

Thanks for the advice.

So to summarise ... while still resident in UK I can sell my UK PPR and not be liable to any CGT here.
Once I move over to Poland I can sell the investment property which I have held for over 5 years and thus not have to pay CGT in Poland.

As long as I do not return to UK for 5 years I will not be liable for any CGT on this property.

Will the proceeds of the sale of the investment property be deemed to be 'income' and thus liable to tax ? If this is the case ...what is the best way around this problem as I see that in January income tax will be up to 50% !!!!

Thanks in advance

[Lambs]

AngloPol, without wishing to belabour the point, you would be best served by obtaining direct professional advice. Many of us are tax professionals and, as I am sure you realise, painfully aware of the consequences of inappropriate tax advice. We are happy to point you in the right general direction, and draw your attention to what we feel are relevant planning points, but there is a very substantial amount of tax at stake, and every individual's circumstances are unique, so please ensure that your actions are guided by someone who is professionally qualified to advise you, and who is in a position to do so with all relevant facts to hand.

[Trimble]

We are considering taking up temp. retirement residency abroad. I have been advised that as long as we are abroad for 5 complete tax years, it is then possible to sell rented property in UK and not have to pay any CGT As long as the proceeds are invested within UK and not the country we are living in we will not be liable for CGT abroad. However any rental income will be taxed in UK until the point of sale. I would appreciate any confirmation of this and would be pleased to hear of other personal experiences.