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bigduckontax
bigduckontax, Accountant
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Hello, I am French but lived in the UK for 18 years. During

Customer Question

Hello,
I am French but lived in the UK for 18 years. During that time, I bought a house with my husband who later died. I have moved back to France on 3rd August 2012 and I am now thinking of selling our house - not urgently. I am wondering whether I would be liable to capital gain tax if I sold the house? I do not own another house in France where I live in my parents' house. Can you help? Thanks, Violaine
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello Violaine, I'm Keith and happy to help you with your question.

I assume that you livid in your house until your husband's death. As it is is your sole or main domestic residence you should escape Capital Gains Tax (CGT) through Private Residence Relief. Has the house been let ever?
Customer: replied 3 years ago.

Hello,


thank you for your response. Yes I did live in the house with my husband and our 2 children until he died. We bought the house in April 2007 and lived in it for over 5 years. The house is now being let until I decide what to do with it.


Thanks Keith.


Regards,


Violaine

Expert:  bigduckontax replied 3 years ago.
Ah ha, now you have a slight problem. Did you move back to France for employment purposes? Sorry to have all these queries, but CGT is extremely complex.
Customer: replied 3 years ago.

I moved to France to be near my family. I still do work with my UK company - now from home - but the reason for the move was not professional. Am I right in saying that I would need to sell it within 3 years of having left in order to avoid capital gain tax? And I assume the tax is only on the profit I make from the sale, right? Sorry to ask all these questions, I am clueless! Thanks

Expert:  bigduckontax replied 3 years ago.
Don't worry, after this you will be even more clueless! You have the three year rule correct and the year of sale doesn't count either. However the rules change next tax year (from 6 April 2014) and the 3 years drops to 18 months. If you don't sell quickly and in the UK at present that isn't easy then you might be caught. You are also entitled to Lettings Relief. However, nothing can be calculated unless the figures are known. You would need the purchase price, less costs, probate value as at your husband's death to create a notional purchase price. Then the sale price less costs is used to determine that gain or loss. However, with the UK housing market as it is at present the CGT is likely, after all reliefs, to be very small and anyway you have an annual allowance of 10.9 K to take into account well.

I am just off out to collect my wife from her friend's house, back about 1430 hrs [1500 hrs French time].
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Category: Tax
Satisfied Customers: 3612
Experience: FCCA FCMA CGMA ACIS
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Customer: replied 3 years ago.

Sorry I just responded but I'm not sure I am allowed to get more advice as it says "status: finished" :( I am happy to pay to finish the conversation if that's necessary. We bought the house for £315K in St Albans, it is now worth about £400K. The probate value was around £35K (why does that count?). The children and I have now been in France for 18 months and 2 weeks so I have passed the limit - right?


Thank you for your precious help.


Kind regards,


 


Violaine

Expert:  bigduckontax replied 3 years ago.
Because you bought the house with your husband you are assumed to own it 50/50 until his demise. So the cost for you is of the order of 332K, I have assumed that you meant 350K not 35K in the probate valuation! You are looking at a gain of say 68K. If you sell before 5 April you will be inside the limit, but anyway the year of sale does not count. Working on the 3 year basis in very general terms you lived in it for 64 months of 83. On the 3 year limit you are out of CGT. On the 18 month rule you take 64 over 83 [increase the 83 by the number of months in the 14/15 tax year], but remember the year of sale does not count. Add 18 to 64 gives 1 month out of 64 liability to CGT equating to 1K capital gain. You won't need letting relief at all, your annual allowance is well above the gain. As I forecast CGT will be minimal, actually nil and you won't need to concern yourself with lettings relief at all.

It seems to me to be a panic over situation and thank you for your support. The site said finished because you gave me a rating. You might be well advised to ensure that the solicitor who handles your sale is well up on CGT just in case of a dispute with HMRC.
Customer: replied 3 years ago.

So, the year of sell does not count? the 83 months refer to the length of time between the purchase and now - correct? It is still a little unclear to me, sorry but would you mind explaining the 18months and the 3 year rule please?.... thank you so much, I will certainly re-rate to the best rating!! From what I understood of the 3 year rule was that I had to sell the house within 3 years of not being a UK resident in order to avoid capital gain. I only pay tax on the difference between the purchase price and the sell price, right? When I said clueless, I wasn't joking! Re. the probate, apologies for the confusion. Yes my husband left a will and left the house to me, the amount of money I received from the probate was £35K from his pensions - nothing else. Does that make a difference in your calculations?


I can't thank you enough for your help.


Kind regards,


Violaine


 

Expert:  bigduckontax replied 3 years ago.
I did warn you, confused, you will be!

The three year rule is currently in force. It is reduced to 18 months from the 14/15 tax year. This is a measure to restrict tax avoidance on a large scale. Remember CGT was first introduced by James Callaghan in Wilson's administration largely to stop profiteering from soaring property values which was leaving many properties vacant for years in a period of acute housing shortage.

The 3 year/18 month rule refers to the period which does not count in calculating a capital gain which is assumed to rise evenly throughout the ownership. The 83 months is the total months you have owned the house; actually I have used March 14 for this. It's application is irrespective of your UK residency. I can see now where you got the probate figure. If it were a Joint Tenancy your husbands share would pass to you automatically as the survivor and not go through probate at all. The 350K is a good figure and I suspect a guess not far from the truth. I started working life as a trainee valuation surveyor with the old London County Council!

Your capital gain is the difference between the sale price less costs and the purchase price plus costs plus any capital expenditure eg new kitchen or bathroom etc. This, in your case as the house has been let out, is adjusted by the occupation by you and the 3 year/18 month period calculated on a monthly basis. As you can see this figure is pretty small and your annual allowance would cover it. That is without calculating any Lettings Relief to which you might be also entitled.

The UK housing market is relatively good at present; just get rid of it!
Customer: replied 3 years ago.

Right, I think I understand, it is not straight forward but does make sense - I think! I might contact you again if I have any more queries but I will leave you in peace for now.


I do realise the market is pretty good but selling the house is very difficult emotionally and at the moment, it is being paid off by being let so... The children are still little (5 and 9) and have very fond memories there of their dad etc.. so selling it would be a big step for us all.. but I did want to understand the tax implications. I seems that I don't need to worry about it too much so that is a big weight off my (very busy) shoulder!


Anyway, thank you so very much for your expert advice, I will recommend your services.


With very kind regards,


Violaine

Expert:  bigduckontax replied 3 years ago.
I know exactly how you feel, it's a big wrench, but as politicians are apt to say, one must move on. I was bumped into my present residence by my first wife 35 years ago and hated it ever since. After my divorce I brought my new wife who is Thai to see it and she loved it so I'm still here, hiss, spit!
Customer: replied 3 years ago.

That made me laugh a lot, thank you! I am also thinking of the future and having a place for them where they can go if they want to ever study or live in England... A long way off but hey! Thank you for everything.


Best regards, Violaine

Expert:  bigduckontax replied 3 years ago.
Not at all Violaine, I have to make an answer or your question hangs around my question list for ever more!
Customer: replied 3 years ago.

Sorry I have been reading our conversation again and there is still 1 thing I don't understand. You said the time of sale doesn't count - can you explain that because I don't get it. You mentioned the 82 months (on 18months rule), I have owned the house for 83 months - giving 1 months worth of capital gain - so the time of sale clearly matters, no? Or have I got it completely wrong?!


Thanks!


 

Expert:  bigduckontax replied 3 years ago.
I think you will find that what I actually said was that the year of sale doesn't count. It's a sort of extra concession. The time of sale is of course important as all the numbers adjust as CGT is calculated on a monthly basis. I did say that my figures were only general and I did not compute exactly. As I said your CGT liability is going to be very low, almost probably none at all.

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