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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 14002
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I lived in France for 6 years and completed french tax returns

Resolved Question:

I lived in France for 6 years and completed french tax returns there, on returning to the UK the HMRC have asked for financial information during my time abroad, ie what income I had. Do they have a right to ask for this information?
Submitted: 3 years ago.
Category: Tax
Expert:  Sam replied 3 years ago.
Hi
Thanks for your question
This is unusual if
1) you spent less than 90 days each tax year in the UK and none of these were for work days
2) You did not have a UK employer or
3) You had no UK income arising - such as rental income
However, if any one of the three did apply - then they do have a right to ask for that information.
Can you advise how this has come about?
Thanks
Sam
Sam and other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Thanks for your reply Sam, it has come about as my husband started as a sole trader last year and failed to register and then failed to complete self-assessment, HMRC now want to know what we have been doing since we came back to the UK four years ago. The first two points you mention do not apply and we although we did have rental income from a property in the UK for the first year we were abroad I can't remember how much it was or for how long we had it! They have asked for french bank statements to "assist them" but I have not kept them so cannot prove anything.

Expert:  Sam replied 3 years ago.
Hi Liza
Thanks for your response
Did you declare to HMRC the rental income ? Did you sell this said property? Did you have a managing agent acting for you?
Thanks
Sam
Customer: replied 3 years ago.

No we didn't declare it as we were abroad (should we have? oops), yes we sold the property and no managing agent was used.

Expert:  Sam replied 3 years ago.
Hi
Thanks for your response
Yes you should have declared the rental income as this arose in the UK so remained a UK tax consideration but if you declared it to the French tax authorities, and suffered French tax on it, then this can be taken into account to offset against any UK tax position.
But assuming the property was in joint names then you are entitled to you UK personal allowances each to offset against this income.
So you will need to get relevant bank statements detailing the rental income received, and for what period of time and hopefully the bank statements might also detail any mortgage payments made (as the interest element of any mortgage payment is an allowable expense, as is buildings insurance, key cutting, repairs etc - so you may need to go through those relevant bank statements and also contact any mortgage lender for details of what interest was paid for those periods.
So self assessment tax returns should have been completed for the relevant tax years.
And there may well be a capital gain position BUT if you remained out of the UK for at least 5 full tax years - which may not be the case, when did you leave the UK and when you did you sell the property and when did you return to the UK (as 6 calendar years may not fulfil 5 tax years, which run from 6th April to 5th April)
You should also arrange to get copies of the French bank statements - as you will need to provide these, as HMRC have reason to enquire into your husbands affairs for both the rental income and potential capital gain position.
Let me know if you have any follow up questions
Thanks
Sam
Customer: replied 3 years ago.

Thank you Sam you've been very helpful, can you just clarify something, I understood that you only pay capital gains on a second property so why would be liable for any gain on our UK property? Would our french property therefore be classed as our main residence - even though it was not habitable for 6 months and we lived in a caravan?

Expert:  Sam replied 3 years ago.
Hi Lisa
Thanks for your response
As this ceased to be your home (main residence) then there might be a capital gain to consider. However if the time from when you moved out and sold the property was less than 3 years
then the time you lived there plus the last 36 months of ownership are exempt from capital gains under the orivate residence relief rules
Thanks
Sam