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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 a British expat who owns a property in UK which I rent

Resolved Question:

I am a British expat who owns a property in UK which I rent out. I understand that the British Government is about to introduce CGT on the sale of properties owned by non-residents from April 2015. Will the CGT be based on the increase in value from the time that the new legislation is introduced, i.e. on the value of the property at that time, or will it be applied retrospectively, using the original buying price as the basis for calculating the CGT?  If the former, how will they assess the April 2015 value?  Would a valuation by an estate agent suffice?  Please note that this is critical to my deciding whether or not to sell the property before the legislation comes into force.

Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

You can read the UK government's detailed proposals here. You have to remember that a general election will be held in May 2015 and whilst I expect some form of legislation will be put in place to tax gains made by non-residents on UK residential property, nothing is set in stone. The document I have given you a link to sets out the proposals and invites comment and ideas from interested parties.

It is likely that only gains accruing from 6 April 2015 will be taxed and so it will probably be necessary for property owners such as yourself to have valuations done by reputable valuers or estate agents on their property as at 5 April 2015. There is nothing new in that concept. Executors of deceased estates have to have property valued. Any valuation is open to HMRC scrutiny by referral to The District Valuer so it will have to be realistic when a gain is declared.

As the fine detail has yet to be decided on , it is not clear how the new rules will interact with the current reliefs given to those whose UK property was their main home at some point before they moved abroad. All you can do for now is to monitor developments.

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

Customer: replied 2 years ago.

Tony,


 


Thanks for this reply which clarifies the situation. Based on this, it seems that there is no need for me to dispose of the property prior to the introduction of the legislation as there is no intention to calculate the applicable tax retrospectively. However, if I dispose of the property after my return to the UK and once again become a UK resident, will I then be taxed on the increase in value from the date of my return, or based on the original purchase price?


 


Regards,


John

Expert:  TonyTax replied 2 years ago.
As things stand, if you resume UK tax residence, I would expect that the gain or loss on a disposal of the property would be based on the original purchase price as the government has not said anything else. However, I'd be surprised if representations were not made to change that situation though it could be argued that it would be unfair to those who owned UK residential property and who had not moved abroad. The consultation process is designed to iron out the potential anomalies.

The government wants the rules to be simple but I think they will be anything but. The new UK statutory residence test system proves that.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15886
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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