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bigduckontax
bigduckontax, Accountant
Category: Tax
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We are in the process of selling what was our primary residence

Customer Question

We are in the process of selling what was our primary residence overseas until 2 yrs ago. Lived in the property for 3 years and then subsequently rented it out when we moved to the UK, but now selling to buy a property in the UK. Do I get PPR on the period I lived in it overseas (and then last 18 months) or is the gain just calculated on increase in value from time I became resident in the UK until disposal?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Please verify your question. You say 'when we moved to the UK.' I think you may mean 'from' not 'to.' Also daw your absence from the UK caused by work? These is of fundamental importance.
Customer: replied 2 years ago.

No moved from Guernsey (outside UK) to the UK 2 years ago and now selling property in Guernsey which is outside the EC. We made a long term move to Guernsey 10 years ago and then decided to return 2 years ago. During period in Guernsey we worked for the local authority as teachers.

Expert:  bigduckontax replied 2 years ago.
Ah, I see; Guernsey, as you are probably aware, has no Capital Gains Tax (CGT) regime so any gain made there would not be taxable.
If you reside in the UK for more that 183 days in any one tax year you are liable for tax on your world wide income. The gain you made on your Guernsey residence is subject to UK CGT. However for the period you lived in it you would be entitled to Private Residence Relief (PRR) which relieves the tax at 100%. Furthermore you have 18 months to dispose of the property. You let it out so you would be entitled to Lettings Relief (LR) up to 40K in place of your Annual Exempt Amount (AEA) of 10.1K.
Now for the complex bit. Take the total ownership period in months. Take the letting period ditto and deduct 18. The factor then created is applied to the gain to determine what proportion of the gain is actually exposed to CGT. Then apply the LR or the AEA, whichever is the more favourable. the balance is then taxed at 18$% or 28% or a combination of the two rates depending on the income including the gain in the tax year of sale. You may well find that your liability is zero or at worst minimal.
To compute the gain you need an acquisition and a disposal price. The former is the purchase price plus costs of purchase plus any improvements, but not maintenance. The disposal price is the net sum received after deducting agents,' solicitors' fees, advertising etc.
I do hope that I have shed some light on your position.
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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