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TonyTax
TonyTax, Tax Consultant
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We bought our family home in UK in 1984 for £70k with a 25

Resolved Question:

We bought our family home in UK in 1984 for £70k with a 25 year repayment mortgage. In 2007 we remortgaged (interest only) it for £160k in order to buy a house in France. We went to live in this house in France in 2008 and have been letting our UK property since then. We now are considering returning to the UK and selling the UK property in order to allow us to buy another main UK residence. The UK property is worth £320k but there is still £160k outstanding on the mortgage. What are the capital gains implications of selling our property please.
Thank you
Steve Dixon
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

Can you tell me which month in 2008 you went to live in France please. Has the UK property been in joint names since you bought it in 1984? Which month in 2008 did you start letting the UK property? Will you be selling the property you own in France?
Customer: replied 3 years ago.

We officially became permanently resident in france (for UK/France tax purposes) on 4th April 2008. However the property was let (short term at first) from October 2007. The UK property has been in joint names since 1984. We aim the property in France to become our holiday home/maison secondaire.

Steve Dixon

Expert:  TonyTax replied 3 years ago.
Thanks.

Leave this with me while I draft my answer. There is a far amount to consider so please bear with me.
Expert:  TonyTax replied 3 years ago.
Hi again.

If you sell the UK property by 5 April 2015 whilst non-UK resident, you will have no UK CGT to pay even if you returned to the UK afterwards as you will have completed five full UK tax years abroad. That period started on 6 April 2008 and ended on 5 April 2013 in your case. You would, however, need to consider the tax position in France before deciding to sell the UK property whilst resident there for tax purposes.

From 6 April 2015, the gains made by non-UK resident individuals on the disposal of UK residential property will be taxable in the UK but only on any increase in value after 5 April 2015. So, the 5 April 2015 value of the property will become the cost for CGT purposes. How main residence relief and letting relief accrued up to 5 April 2015 will fit into the new system remains to be seen as the detailed rules are still being decided upon by The Treasury and HMRC.

The following figures are based on a gain for each of you of £125,000 (£320,000 - £70,000 / 2) and a period of ownership from 1 January 1984 to 31 December 2014. That is 372 months of which you will have lived in the property for 285 and let it for 87.

If you sell the property after resuming UK tax residence, the gain for the period the property was your main home will be exempt from CGT as will the gain for the last 18 months of ownership. That accounts for £101,815 (£125,000 / 372 months x 303 months). The remaining gain of £23,185 is that part of the letting period gain which is not covered by the last 18 months of ownership (£125,000 / 372 months x 69 months).

As the property was both your main home and it was let you will be entitled to letting relief which will be the lesser of:

1 £40,000,

2 the sum of the main residence period gain and the gain for the last 18 months of ownership of the property which is £101,815 and

3 that part of the letting period gain not covered by the last 18 months of ownership which is £23,185.

Letting relief of £23,185 will reduce the remaining gain of £23,185 to £0 so you will have no UK CGT to pay.

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