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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am Swiss married to a British citizen for 46 years. We are

Resolved Question:

I am Swiss married to a British citizen for 46 years. We are thinking of moving to Switzerland. I own a property in London which has been rented out since I bought it 18 years ago and would like to know what the capital gains tax situation is, should I want to sell it when I am living in Switzerland. Am I exempt?

Kind Regards,
Maya Deyes
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you give me an idea of when you are thinking of leaving the UK please. Will you be retaining a home in the UK? Are you retired or still working? If you go to live in Switzerland, will you or your husband be working or retiring there?
Customer: replied 2 years ago.

We are both retired and would like to move to Switzerland as soon as we have sold our home. We will not be working in Switzerland.


 

Expert:  TonyTax replied 2 years ago.
Thanks.

Is the home up for sale now or is it sold subject to contract?
Expert:  TonyTax replied 2 years ago.
I'm referring to the let property.
Customer: replied 2 years ago.

The let property we will only put on the market once we are living in Switzerland.

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer. There is a fair amount to type so please bear with me.
Expert:  TonyTax replied 2 years ago.

Hi again.

The UK tax residency rules changed with effect from 6 April 2013. You can read about them here and here.

Gains made by non-UK resident owners of UK residential property which is sold after 5 April 2015 will be subject to UK CGT on that part of the gain which accrues after 5 April 2015 so it will be necessary to have a valuation done for future reference. Prior to 6 April 2013, non-UK residents could sell a UK property after the end of the tax year during which they left the UK free of UK CGT so long as they did not return to the UK before they had completed five full UK tax years as a non-UK resident starting from the first 6 April after they left the UK. If a property was sold after departure from the UK but in the same tax year, the gain would have been liable to UK CGT, depending on reliefs. The split year treatment did not apply to CGT.

Under the new rules, you are either UK resident or non-UK resident for the whole tax year. However, the tax year of your departure from the UK can be split into two periods, a period of residence in the UK and a period of non-UK residence.

Assuming a disposal occurs in the current tax year, 2014/15, but after you have left the UK, so long as you are " tax resident" in the UK for that tax year (as bizarre as that sounds), you will qualify for compulsory split year treatment and the gain will escape UK CGT. The caveat is that if you return to the UK within five years of your departure (not five full tax years), the gain will be subject to UK CGT in the tax year of your return to the UK. If you left the UK in 2014/15 and sold the UK property in the 2015/16 tax year whilst you were non-UK resident only the increase in value from 5 April 2015 would be subject to UK CGT. In effect, the value of the property on 5 April 2015 would become your cost for UK CGT purposes.

What you need to establish if you want to sell the property in the current tax year is that you will qualify for compulsory split year treatment and to do that, you must be "tax resident" in the UK. You also need to have been resident in the UK in 2013/14 and be non-UK resident in 2015/16.

You probably won't qualify as automatically non-UK resident under the three tests for that status to apply which is a good thing for your situation if you want to leave the the UK and sell the property by 5 April 2015. See from page 9 here for the automatic overseas tests.

Look at page 17 onwards here for the automatic UK tests. Assuming you fail the first test by leaving the UK before 183 days have elapsed from the start of the current tax year, you may or may not qualify to be UK tax resident for 2014/15 under the second test. This requires you to have a home in the UK for at least 91 days in the tax year, that you occupy that home for at least 30 days in the tax year and during that 91 day period you have no home abroad or if you do, you spend less than 30 days in it during the tax year. So, if you have no home abroad during the period of 91 days or more, you should meet the second test. You will fail it if you already have a home abroad and you spend 30 days or more in it in the current tax year. The third test is not relevant to you.

If you don't meet any of the automatic overseas or automatic UK tests, you need to consider the sufficient ties tests from page 28 onwards here.

If you don't qualify for compulsory split year treatment for the tax year of your departure from the UK and you sell the UK let property in the same tax year, any gain you make from the sale of the UK let property will be subject to CGT even if that sale occurs after you have left the UK. Much depends on when you leave the UK as the number of ties you need to establish UK tax residence is dependent on the number of days you spend in the UK.

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

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15841
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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Expert:  TonyTax replied 2 years ago.
Thanks for accepting my answer.

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