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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My wife and I sold our house in uk in the summer 2013, which

Resolved Question:

My wife and I sold our house in uk in the summer 2013, which we bought in 1999. We had it rented out from 2002 until it was sold, as I was working overseas in Europe.
I declared the Rental income on my annual uk self assessment forms.

We now have bought a house and are living in USA.

How what are the implications for CGT. How do i fill in these forms with the 2013/4 Tax and what will it cost me?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

When did you move to the USA? If that was before you exchanged contracts to sell the UK house can you tell me if it is your intention to live in the USA permanently or do you envisage returning to the UK at some point. If you do envisage returning to the UK, do you have any idea when that might be?

When you worked in Europe, were you sent there by the employer you worked for in the UK or did you decide to take a new job abroad of your own volition? Did you return to the UK and spend any time living in the property between 2002 and when it was sold or could you not return to live in when your Europ stay ended because your employer decided to send you to the USA?

Whilst you lived and worked in Europe, did you buy a property to live in, did you rent one on a long term or short term lease or were you provided with living accommodation by your employer?
Customer: replied 2 years ago.

We moved to USA in May 2012, where we intend to stay. Sold the house in UK August 2013


Yes i was working in Europe for same UK Employer.


 


We did not live in the house we sold during any period since 2002 until sold.


We rented houses in Europe in Italy and Holland to live in whilst working in Europe.

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 2 years ago.


OK, the US tax assistant is asking me about CGT as i need to file the US tax return, but need to understand what i will put on my uk Return when i get it in next few weeks.

Expert:  TonyTax replied 2 years ago.

Hi again.

Provided you don't return to the UK permanently and re-establish UK tax residence within five full tax years of leaving, then you won't have to pay Capital Gains Tax in the UK on the gain you made from the sale of your UK home. As you left the UK in May 2012, your five full tax years started on 6 April 2013 so you should not become UK resident again before 6 April 2018. If you do become UK tax resident before that date, that part of the gain not covered by reliefs will be subject to UK CGT.

If for some reason you did become UK resident before 6 April 2018, then part of the gain you made when you sold the property will be taxable. The gain will be treated as having accrued evenly over the entire period of ownership so it should be easy to work out the taxable and non-taxable parts.

That part of the gain covered by your occupation of the property will be exempt from CGT as will the gain for the final three years of ownership. As far as your absence working and living abroad is concerned, so long as you did not have another property which would qualify for main residence relief, you would qualify for exemption from CGT for that part of the gain covered by that period if you had returned to live in the property at the end of the period in Europe which you did not. However, if you could not return to live in the property because your employer sent you elsewhere the absence relief would still be available.

If you do not qualify for absence relief, then each part owner of the property will be entitled to a further deduction from the gain called letting relief which will be the lesser of:

1 £40,000,

2 the sum of the main residence gain and the gain for the last 36 months of ownership of the property and

3 that part of the letting period gain not covered by the last 36 months of ownership.

You would only need to call on absence relief or letting relief if you became UK resident before 6 April 2018.

Take a look at the HMRC helpsheet HS283 here and at CG65030, CG65040, CG65046, CG65047 and CG65050 starting here for more information on main residence relief, letting relief and absence relief.

As of now, you will have no UK CGT to pay which would be deductible from a CGT liability in the USA.

I hope this helps but le tme know if you have any further questions.

Customer: replied 2 years ago.


OK I think I've understood.


No CGT to pay in uk unless i return before April 2018, which would then be based on a clac of how long we lived in the property whilst owned. etc


 


I wonder if the US will smash me on CGT instead? I will advise my Tax advisor here in US I am not liable for UK CGT uless I return to live in UK before 2018.

Expert:  TonyTax replied 2 years ago.
I think there will be some relief for the fact that it was your main home for some part of the period of ownership, though I cannot tell you the detail.

You will need to complete the CG pages for your 2014 UK tax return. The 2012/13 pages are here. Those for 2013/14 won't be released until after 6 April.
Customer: replied 2 years ago.


OK thank you. I will get the 2013/4 self assessment through the post as normal and will complete the extra pages for the CGT from house sale in Aug 2013.


But expect to pay nothing in UK.


But expect to pay in USA , unfortunately.


 


 

Expert:  TonyTax replied 2 years ago.
Thanks and good luck.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15764
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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