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I am non resident in the Uk having lived and worked in Spain

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I am non resident in the Uk having lived and worked in Spain and Italy for the past 7 years. I have a property in the UK occupied by my son. I plan to return to the UK in the next year or so and intend to gift the property to my son before returning so the gift is not subject to CGT. If after I return my son decided to gift half of the property back to me (or indeed all of the property) would there be any tax to pay on that gift? My understanding is that since the original gift is deemed at market value and failing any increase in the meantime a second reverse gift would be tax free. Am I correct?
thanks
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.
Hi
Thanks for your question and asking for me
I am afraid the rules on non residents and capital gains have charged from effect of 06/04/2015 which states that any gain made up to 05/04/2015 (where the remit has been met - so you have spent at least 5 years out of the all of which meet the Non Resident rules) can be treated as exempt from UK tax (and so liable in your country of residence) and then any gain made from 06/04/2015 to the date of sale or transfer - then is considered for capital gains - so I would advise you get a valuation now to establish the base value.
Gifts themselves and not liable to capital gains, its the asset (property not being your main residence for more than 18 months) that triggers the capital gain.
And you will need to be aware of the Inheritance tax implications - which state should you pass away within 7 years of the date of making the gift, then it has to be considered for Inheritance tax (which only really is an issue if your estate is worth more than £325,000)
Why you then wish to have the property (half or whole) gifted back to you makes no sense.
This would then create a capital gain on your son (if there was an increase in value between the date you gifted and he gifted back and would also affect him for Inheritance tax
But it would not be tax free - just might give rise to no liability die to the failure to see an increase in excess of £11,100 (the annual exemption allowance)
If you are doing this to avoid the true capital gain position - then there is every change HMRC will revoke this - and treat this as never having been gifted at all (which will not at this stage make a huge difference to the capital gain position as you do have this UK exemption up until 05/04/2015 due to non residency) but any gift back to you, if this then does not become your main residence will then have the WHOLE capital gain position to consider as the time out of the UK will not necessarily could (other than 3 years absence for any reason from the property)
So just be mindful of this
Let me know if you wish me to expand on any furtehr information regarding this issue.
Thanks
Sam
Customer: replied 1 year ago.

You spend the first half of your ‘answer’ telling about a change in the law then about the status of gifts then about inheritance tax. None of which I asked about.

You then proceed to lecture me on what I’m asking about making ‘no sense’ and how it will trigger x and y etc etc.

Forgive me but since you know nothing about the circumstances I think that unhelpful. It is also an presumptuous insult.

Finally you talk about the ‘true capital gain’ position – a term that has no meaning without definition.

And then you issue your ‘advice’ in a paragraph that makes no grammatical sense.

That is quite aside from the numerous spelling errors that render half of what you say into meaningless goobledeegook.

What for example do these sentences mean –

‘the time out of the UK will not necessarily could’

‘there is every change HMRC will revoke this’

‘Gifts themselves and not liable to capital gains’

I wonder that you can issue advice without bothering to read what you have written to see if it makes sense.

Given the above I am not willing to pay you a fee.

I will instead try someone else.

Expert:  TonyTax replied 1 year ago.
Hi.

There are Inheritance Tax implications even though you have been abroad for seven years but I will leave those alone as you didn't ask about them. I have to mention them as I am a professional.

In theory, there is nothing to stop you gifting your UK property to your son, the "gain" being exempt from UK CGT due to your non-UK residence. You would need to consider the tax position in Spain of a such a transaction.

If, on your return to the UK, your son gifted the property back to you and there had been no increase in value since your gift to him, then there would be no gain. However, if HMRC looked closely, they might well suggest that the two gifts were a ruse designed to uplift your base cost for Capital Gains Tax purposes so that in the event you sold the property in future, you would either have no CGT liability due to your having lived in the property since your return or a reduced CGT liability due to the increased base cost. There are rules in place to counter circular schemes where the sole purpose is to avoid tax.

If you have not owned a property in Spain which could be seen as your main residence for CGT purposes, then you may still qualify for main residence relief for the period that you have spent in Spain so long as you re-occupy the UK property before a subsequent disposal. That's assuming it was your main residence at some point before you left the UK. Take a look at CG65040 here and CG65046 here for more information on the criteria.

I hope this helps but let me know if you have nay further questions.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15754
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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