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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15940
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My farther bought me a house in Moscow in 1999 and it was registered

Resolved Question:

My farther bought me a house in Moscow in 1999 and it was registered in my name. It cost about £150,000 plus we invested another £80,000 on decoration. In 2006 I got my leave to remain in the UK and I declare myself as domicile since then. I've sold my house a week ago for £400,000. I'd like to bring money in to the UK to invest into properties.

How much and how capital gain will be calculated? Thank you. Anastasia
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

Can you tell me how long you have been living in the UK please. Was the property in Moscow every your main home? If so, was it ever let? I may need to ask for more information depending on your answers. Do you want to invest in residential property?
Customer: replied 3 years ago.

Hi,


 


I've been living in the UK for 13 years. Property in Moscow was my main home for about 3-4 years.


 


I never let my Russian property.


 


Yes, I would like to invest in residential property.


 


 

Expert:  TonyTax replied 3 years ago.
Thanks.

Which month in 1999 was the property bought? Can you tell me eaxctly how many months you actually lived in the property please. I need this information so that my calculations are accurate.
Customer: replied 3 years ago.

I've just checked the agreement was from 12 February 1998 not from 1999.


 


I would say 36-37 months.


 


Thanks

Expert:  TonyTax replied 3 years ago.
Thanks.

Leave this with me while I do some calculations and draft my answer. It will take a little time.
Customer: replied 3 years ago.

Thank you.

Expert:  TonyTax replied 3 years ago.

Thanks.

You sold the property in February 2014 for £400,000 and made a gain of £170,000 (£400,000 - £150,000 - £80,000). The purchase price figure must be the UK equivalent of the Russian currency at the time of purchase, the improvement costs figure must be the UK equivalent of the Russian currency at the time the expense was incurred and the sale price figure must be the UK equivalent of the Russian currency at the time of sale. The expenses of purchase and sale such as legal fees, selling agent fees etc can be deducted from the gain before the tax is calculated. I have assumed the £80,000 "decoration" expense was in fact improvements to the property. The expense of normal decoration is not deductible for CGT purposes. The tax office may ask to see proof of the improvement expenditure in the form of receipts and invoices. Take a look at the HMRC helpsheet HS283 for more information on CGT and the main residence.

You owned the property for 192 months and lived in it for 36. The gain for the period the property was your main home is exempt from CGT as is the gain for the last 36 months of ownership. That accounts for £63,750 (£170,000 / 192 x 72). The remaining gain of £106,250 is the taxable gain (£170,000 / 192 x 120). The first £10,900 will be tax free so that leaves a net taxable gain of £95,350.

There are two rates of Capital Gains Tax, 18% and 28%. The rate or combination of rates that will apply will be dependent on the level of your income in 2013/14. One of the following scenarios will apply to you:

1 If your income in 2013/14 including the taxable gain is £41,250 or less, then all the taxable gain will be charged at 18%.

2 If your income in 2013/14 excluding the taxable gain is more than £41,250, then all the taxable gain will be charged at 28%.

3 If your income in 2013/14 excluding the taxable gain is less than £41,250 but more than £41,250 when you add the taxable gain to it, some of the taxable gain will be charged at 18% and some at 28%.

Unfortunately, you cannot defer your CGT liability by investing in residential property in the UK unless you are selling a business asset and investing in another business asset. A furnished holiday let would qualify as a business asset but your property in Moscow was not.

As a non-UK domiciled individual, you should read section 9 of the HMRC document here. You are entitled to use the remittance basis of assessment but as you appear to have been resident in the UK for at least 12 of the preceding 14 tax years, you would leave yourself liable to the remittance basis charge of £50,000 for any tax year you choose to use the remittance basis for. Since you wish to bring the money from the sale of your property in Moscow to the UK, this will be largely irrelevant to you but I thought I'd point it out to you.

Finally, you may have to pay tax in Russia on the gain as computed for Russian tax purposes and you should take advice on that but if you do it will be deductible from your UK CGT liability under the terms of the double tax treaty between the UK and Russia.

I hope this helps but let me know if you have any further questions.

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