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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15841
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Regarding Capital Gains Tax and Double Taxation agreement:

Customer Question

Regarding Capital Gains Tax and Double Taxation agreement: I recently sold property overseas (South Africa) and would like to know:
1. I would like to pay tax on this in the UK, how is the amount taxable determined.
2. I have made a profit in Rands (ZAR currency), but due to exchange rate the initial GBP capital investment has returned no profit margin. Can this be beneficial to my tax return or will I pay tax on the profit in ZAR.
3. If the profit is caluclated in ZAR and tax payable in the UK, is the profit calculated at the exchange rate at the day of sale? E.g., on April 21 the profit of Rx will be calculated at the ZAR/GBP exchange rate on the 21st of April.
3. Can I claim tax relief (£10,900) on the sale of overseas property.
Thanks
Pieter
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you confirm whether or not you are a UK national please.
Customer: replied 2 years ago.

I am a UK national since October 2013, before that I have been resident and paying tax in the UK since 2006.

Expert:  TonyTax replied 2 years ago.
Thanks.

I think you mean that you have been a UK citizen since October 2013. That isn't the same as being a UK national so can you tell me where you were born please and what nationality your father is?
Customer: replied 2 years ago.

I was born in South Africa, my father as well. In October 2013 I received dual nationality of both RSA and GB. I have been resident and working in the UK since 2006

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer. There is quite a bit to get through so please bear with me.
Expert:  TonyTax replied 2 years ago.
Hi again.

You ought to read RDR1 which you can find here, in particular the sections numbered 5, 8 and 9.

If you intend to bring the money from the disposal of the property in South Africa to the UK, you will have to pay UK CGT if you have made a gain in excess of the annual CGT exemption which is currently £11,000. You may be entitled to a reduction in the taxable gain if the property was ever your main home. See HS283 here for more information on this. Be aware that the relief for the final 36 months of ownership of a property you are not living in was reduced to the last 18 months with effect from 6 April 2014.

The basic gain is calculated by deducting the sum of the purchase price, purchase and selling costs and improvement costs from the disposal proceeds. Purchase and sale costs can include legal fees, survey fees, selling agent fees etc. Take a look here for more information on property CGT.

Gains made on currency exchange are taxable in the UK. You will need to use the UK/South African Rand exchange rate at the time you bought the property to determine the cost for CGT purposes.

You will need to use the UK/South African Rand exchange rate at the time you sold the property to determine the sale price for CGT purposes.

Take a look here for exchange rates. You can either use the exact rate of exchange on the dates of purchase and sale if you know them or the average rate for the year to 31 March in the tax years of purchase and disposal. The UK tax year runs from 6 April to 5 April.

You may not qualify for the CGT allowance of £11,000 if you choose to be taxed on the remittance basis for 2014/15 as opposed to paying UK tax on your worldwide income and gains. See page 52 of RDR1 here and the notes here.

According to the double tax treaty here, you may have to pay CGT in South Africa and if you do, it will be deductible from any CGT liability you have in the UK.

I hope this helps but let me know if you have any further questions.
Expert:  TonyTax replied 2 years ago.
I have to go out for an hour or so but I will be back to answer any follow up questions that you may have.
Customer: replied 2 years ago.
Thank you for the detailed information, it was very informative. Could you please clarify the following few items?
From RDR1, I think I can state the following:
My domicile is UK, "Domicile of choice" as I am "now living here permanently" with no plans on leaving, paying taxes on an Arising basis.
If this is the case, is your following statement still accurate?:
"According to the double tax treaty here, you may have to pay CGT in South Africa and if you do, it will be deductible from any CGT liability you have in the UK."
As the gain is not in excess of £11000, there should be no CGT payable in the UK. If it is an actual loss in GBP (but not necessarily in ZAR), is there anything I can do as a PAYE tax payer to recuperate?
Thanks
Pieter
PS: excuse the bad formatting, I edited my answer after posting and cant seem to get the formating back
Expert:  TonyTax replied 2 years ago.
If you are UK domiciled as well as UK resident, you are taxable on your worldwide income and gains.

I'm not an expert on South African tax so you should seek advice from an expert on South African tax for a definitive view on your situation. However, if you look at Article 13 paragraph 1 of the double tax treaty between the UK and South Africa here, it says that gains made by a resident of a contracting state (you as a UK resident) from the alienation (disposal) of immovable property in the other contracting state (a property in South Africa) may be taxable in that other state.

You cannot offset non-business capital losses against income I'm afraid. Some types of investment losses may be relieved against income but not a property loss. If you cannot offset the loss against other gains you make in 2014/15, you can carry it forward indefinitely to use against gains you may make in the future. You only use a sufficient amount of brought forward capital losses to reduce your current year gains to the annual exemption level or to use them up before you reach that level.

You should register your capital loss with HMRC within four years of the end of the tax year in which it is incurred.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15841
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

I am a lot clearer now, thank you for all the information.

Expert:  TonyTax replied 2 years ago.
Thanks for accepting my answer.
Expert:  TonyTax replied 2 years ago.
Please ignore the offer you may receive. I clicked on this by mistake. My apologies for any inconvenience.

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