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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4416
Experience:  FCCA FCMA CGMA ACIS
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My late husband's father left a house in France between the

Customer Question

My late husband's father left a house in France between the two of them. His father bought it in 1995 and I'm not sure how much it cost him but I think it was around £60k. My husband wanted to sell the house to a third party but his brother has refused and wants to buy my husband's share for £75k. (Before he died, my husband's father had transferred ownership between the three of them so they owned a third each.) His father made a lot of improvements, including installing a swimming pool.
Will my husband have to pay capital gains tax on this transaction and, if so, how much'
Thank you.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and please to be able to help you with your question. Yes, he will be liable for UK CGT on the gain made on this transaction. However, it will not be based on the 75K sale achieved, but be calculated using the current market value less the probate value plus improvements. Your husband does have an Annual Exempt Amount (AEA) of 11.1K to offset any gain. If this house has been let please come back to my as Lettings Relief up to 40K may be available in place of the AEA. He may also be liable for the French equivalent and there I cannot assist. French tax is so complex and also in an endless state of flux that the use of a trusted, local agent is essential. However, under the Double Taxation Convention between the UK and France the gain cannot be taxed in both countries and any tax paid in France would be allowable as a tax credit against any UK liability. Without an indication of the current market value and the amount spent on improvements I cannot compute any possible gain as there is insufficient data. I do hope that I have helped with my answer.
Customer: replied 2 years ago.
We had the property valued 2 years ago at 220,000 Euros.
The French notaire has told my husband the figure he has to pay is 7,427 Euros (approximately £5,235). Do you think this sounds about right?
Thank you
Expert:  bigduckontax replied 2 years ago.
I am a diabetic and must have my dinner, back soon!
Customer: replied 2 years ago.
OK!
Expert:  bigduckontax replied 2 years ago.
That gives a current value of say 155K.
How much was spent on improvements [like the swimming pool], please?
Customer: replied 2 years ago.
Not sure but probably in the region of £50k - a very rough estimate. (He used a bit of a cowboy builder - in true Yorkshireman style!) The property is quite run down and a lot of the improvements (including the pool) need remedial work because they were not well done in the first place.
Expert:  bigduckontax replied 2 years ago.

That looks like a gain of say 155K - (60K + 50K) = 45K. Knock off the AEA of 11.1K leaves say 34K liable to CGT at 18% or 28% or a combination of the two rates depending on your husband's income including the gain in the tax year of sale. Worst case scenario is an UK CGT tax bill of some 9.5k. There will a tax credit from France of 5.235K leaving some 4.3K of tax due to HMRC. This gain is declared on his self assessment tax return and for 15/16 tax year would be due by 31 January 2017.

I do hope that I have been of some assistance.

Customer: replied 2 years ago.
My husband is retired and on a teacher's pension of about £19k - he is 59. He doesn't fill in a tax return. Does that make a difference?
Expert:  bigduckontax replied 2 years ago.
He will have to make a return for the tax year of sale.
Some 16K will be taxed at 18%, the balance at 28%; possible UK tax bill now 2.5K.
These figures, I am sure you appreciate, are very general, but I hope you get the gist.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.
Customer: replied 2 years ago.
Thanks very much - you've been extremely helpful and informative.
Expert:  bigduckontax replied 2 years ago.
Delighted to have been of assistance.
Customer: replied 2 years ago.
Just received further info on the value of the property. It was valued at £120k in 2006 when my husband's late father transferred ownership between himself and two of his sons. If it's now worth £155k, does that make a difference to the calculation? (Hope this is not too late for you to answer.)
Expert:  bigduckontax replied 2 years ago.

CGT calculation is:

155K - 120K = say 30K gain. CGT now comes out at around 7.6K as the current value is higher than in the previous estimate. Sorry for the delay; I went to bed early.. This ignores the AEA. However, the house was split between the 3 siblings so the 30K gain is divided by three to give 10K each. As the AEA is 11.1K there is no gain to tax so no CGT due. The French CGT gives no relief as there is no taxable gain under the UK regime.

I mislead you earlier failing to note the three way split. I do hope I have got it right this time.

Customer: replied 2 years ago.
That's great - thanks very much. :-)
Expert:  bigduckontax replied 2 years ago.
Delighted to have been of assistance.