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bigduckontax
bigduckontax, Accountant
Category: Tax
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, I'm moving as a permanent resident to australia in circa

Customer Question

hi, I'm moving as a permanent resident to australia in circa november this year 2015, I'm selling 4 properties, possibly 1 or 2 to go through before april 5th this year but can be delayed seen as we so close to next tax year if more tax efficient to do so. The capital gains will be circa £260,000, they are 3 buy to let properties, 1 plot of land with pp for a house. I lived in the properties while i renovated them and paid bills and council tax but then rented them out all bills inc so kept bills in my name. owned them circa 2/3 years. I'm classed as self employed earning income from land and property. How can i avoid tax of 28% on 260,000, is there any tax exile advice with me moving to australia as a permenant resident in next tax year or entrepreneurs cgt relief or offshore accounts or trusts etc i can put into to reduce the tax amount ill have to pay?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I'm Keith and happy to help you with your question.

In each tax year you have an Annual Exempt Amount (AEA) of 11K (11.1K next year) to offset any capital gain made. This is an Use it or Loose It [HMRC speak] allowance, so with your proposed sales to split them across tax years will reduce your capital gains slightly. Instead of AEA you might get Lettings Relief of up to 40K.

When you move to Oz remember to complete a Form P85 and send it to your tax office. On receipt HMRC will class you as non resident for the tax year following your departure and furthermore split the leaving year into two portions, one resident and one non resident.

Were you to move to Australia and become non resident you would still be liable for CGT on the sales of your UK properties and, furthermore, Australia does not have capital gains tax, any such gains are classed as income and liable to their income tax regime. There is a Double Taxation Treaty in force between the UK and Australia which will preclude you from being taxed in both jurisdictions but it does not protect you from variations in rates of tax. Protection is given by means of tax credits, the tax paid to one country being allowed against a tax liability in another. However if you application for Entrepreneurs' Relief (ER) fails, your income inflated by the capital gains is likely to be well over A$ 180K. The rate of Oz income tax at that level is of the order of 30%, a tad above the maximum UK CGT rate of 28%.

You would probably be entitled to ER which limits the tax rate to a flat 10% providing you sell the assets within three years of cessation of your business.

We are talking big money here. You would be well advised to retain a trusted, local professional to handle negotiations in this matter. Your worst case scenario is a tax bill of say 70K.

I do hope I have shed some light on your position.

Customer: replied 2 years ago.

didn't advise on setting up a limited company and becoming a member of an equity trust in belize before i sell and then having funds put in the trust where the company manages it and receives a loan from the trust for the amount of equity to avoid capital gains

Expert:  bigduckontax replied 2 years ago.
An activity fraught with risk and always subject to the eagle eye of HMRC as possible tax evasion.
The rating is a tad unkind.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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