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Sam
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Category: Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I currently live abroad and own a uk property that is in joint

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I currently live abroad and own a uk property that is in joint name with my father. The property has been rented out for the past 7 years and we are now looking to sell it. In addition to this me and my wife (who also works abroad with me ) are buying a house in the uk as a buy to let until we decide to move back to the uk, which it will then be used as our sole uk family residence. Is there any tax implications on either of these transaction?

Many Thanks
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi

Thanks for your question. I am Sam and I am one of the UK tax experts here on Just Answer.

First I assume both, you and your father have been declaring the rental income to HMRC, as this remains liable to UK tax, so your share should have also been declared less expenses. Personal allowance would have continued to be due also to offset this net rental position.

Then we have the sale, the sale will trigger a capital gains, your father will declare his half share to HMRC - and you too may have a capital gain position to consider - but could you advise
1) When you left the UK to move abroad, and that you live and work abroad (so your wife moved with you)
2) How many days (for each tax year) have you visited the UK, and have any of these been for work purposes
3) Do you have any ties to the UK other than this current property - for example, work ties, children that remain in the UK, a property that you stay at when you visit the UK
4) What are your plans regarding returning to the UK to take up residence again

Thanks

Sam
Customer: replied 2 years ago.
Hi sam i havent filed any returns as i wasnt aware that i needed to as the rental income is only 6500 per year. The rent only just covers the mortgage. We only come back to the uk for holidays approx 3 weeks per year and we have no ties other than the subject property which we have listed for sale.

Also as the property will be sold for the same price as we purchased it for would this waive the capital gains issue?

Expert:  Sam replied 2 years ago.
Hi Greg

Thanks for your response

Regardless of the fact that the interest element of the mortgage repayment, only just covers the rents, you have a legal obligation to declare this to HMRC (this applies to you both) and even though with your continued entitlement to personal allowances, HMRC don't know you make no profit, unless you file a self assessment tax return to tell them.

Whilst you did not advise when you left the UK and what your plans are regarding any return to the UK, the fact is, that yes, if you are selling for the same price of purchase, there is no capital gain arising.

But make note of all I have advised for this new purchase, and remedy the rental income position with HMRC - make a full disclosure, and you might find it prudent to ask a local accountant to where your Dad is based to handle this for you both, so they can try and mitigate any penalties arising for non disclosure (and at this time there is a scheme offering a deal for disclosure on rental income so now is the time to do this )

Thanks

Sam
Customer: replied 2 years ago.
thanks for this information Sam I will ensure that for the new property the returns are done for each year. Me and my wife both left the uk in august/September 2006 and will return April 2017.

Sorry last question is there any risk to us buying the new house whilst I still own the other house jointly with my father?

Thank you so much!
Expert:  Sam replied 2 years ago.
Hi

Thanks for your response and following up question

When you refer to "risk" please elaborate as to what context this is in reference to.

Thanks

Sam
Customer: replied 2 years ago.
sorry Sam by "risk" I mean are there any tax implications related to the new property whilst the other property is being sold?
Expert:  Sam replied 2 years ago.
HI

Other then those already mentioned - about declaring the rental income from the existing property as a matter of urgency - that's all.
There is no capital gain on sale, so this is not an issue, and as long as you also declare the rental income and review any subsequent capital gain position for any future sale on the new purchase, then HMRC will be happy.


Thanks

Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13658
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Customer: replied 2 years ago.
Thanks Sam do the only thing I need to do for the new purchase is to pay the stamp duty and file my annual returns to the HMRC for the years that the property is rented out. I believe that I need to inform HMRC that the new property will be our main residence (once we return to the uk).

Than you so much for all your help I will now contact a local accountant.
Expert:  Sam replied 2 years ago.
Hi Greg

Thanks for your further questions

Yes, once you return , alert HMRC that
1) the rental income will cease and
2) That you have taken up this newer property as your main residence


Then if and when a sale takes place, way in the future, then you can claim the appropriate tax relief's, against any capital gain position (as this will then attract private residence relief and private lettings relief) and you can always come back to Just Answer (and ask for me Sam Tax) as to how this affects any potential gain, if and when a sale arises.

Thanks and good luck

Sam
Customer: replied 2 years ago.
Hi Sam, sorry my wife has just reminded me to ask what are the different tax implications for registering the new property as either join tenancy or tenancy in common with equal share between my wife and I? We are wondering which one is best for reducing any liability for capital and inheritance tax. Thanks
Expert:  Sam replied 2 years ago.
Hi Greg

Thanks for your new question, which I am afraid, due to Just Answer policies, will need to be listed as a new question, with a new amount offered, as this does not form any part of the original post.

If you wish me to answer, then please ask fro Sam Tax at the start of your post.

Thanks

Sam

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