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Subject: UK capital gains tax on property sold in India I

Customer Question

Hi,
Subject: UK capital gains tax on property sold in India
I am Indian citizen and came to work in the UK in 2007. I am resident in the UK (for tax) and now have acquired British citizenship.
I had purchased a residential property in India in 2007 with the intention as my main home. However I continued to work and stay in the UK while my property in India was unoccupied during the year except when my family or myself visit India every year for holiday. I repaid mortgage on the property in India with regular remittances from UK.
I have now sold the property and paid applicable capital gains tax in India. I wish to move the gains to the UK.
My questions are:
1. Since I have never rented out the property and have visited the property for short stay and upkeep during the past years. Can this be classified as sale of my home and therefore gets private residence relief?
2. If No, What would be capital gain taxable in the UK?
Bought (2007): £24,000
Sold (2015): £46,000
Thanks
Submitted: 11 months ago.
Category: Tax
Expert:  TonyTax replied 11 months ago.
Hi.
It would be difficult to claim it was your main home when you have been living and working in the UK. Take a look here for information on the main home and CGT:
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief
The first £11,100 of gains an individual makes in any one tax year are exempt from CGT in the UK. So, if you made a gain of £22,000 and claim no main residence relief, you would have a net taxable gain of £10,900. You can reduce it further by claiming the costs of purchase and sale (legal fees, selling agent fees etc).
There are two rates of CGT in the UK, 18% and 28%. The rate or combination of rates that you will pay will be dependent on the level of your income in the tax year of disposal of the property. Take a look here for guidance on how to work out what tax rate or combination thereof you will pay:
https://www.gov.uk/capital-gains-tax/work-out-your-capital-gains-tax-rate
The lowest the CGT could be is £1,962.00 (18%). The highest it could be is £3,052. It will be somewhere between those figures if the sum of your income and the net taxable gain is more than £42,385.
I hope this helps but let me know if you have any further questions
Customer: replied 11 months ago.
Thanks for your reply. I fully understand your answer to my 2nd question.However I am failing to understand why it is "difficult" to claim private residence relief. It was my only home and half of my family (i.e my wife has been staying there for few months every year for the upkeep. I have been paying maintenance costs for the property as well as local municipal tax each year. I never rented it out and our belongings have been their throughout the ownership period. I would also suggest to have a look at https://www.gov.uk/tax-sell-home/absence-from-homeIt is no different than owning a home in Leeds while living in a rental property in London as I work in London.
Expert:  TonyTax replied 11 months ago.
The fact that it is your only home does not necessarily make it your main home. A rented property can be a main home. As you will read here and here, absence relief when one is working and living abroad applies to somebody with a home in the UK who is working outside the UK. That's what the legislation says. CG65046 here sets out the conditions. I've not heard of the relief being used by someone living in the UK for a home abroad but main residence relief is available for homes outside the UK when an individual comes to live and work in the UK. I wouldn't want to discourage you from claiming main residence relief but I have to point out the potential pitfalls. If you don't claim it, you won't get it so its a case of "nothing ventured, nothing gained".
Customer: replied 11 months ago.
OK. I see you point and I think most of the wording are in that way because a large proportion of case are of people using this relief for home in UK.I also read in one of the links that some relief with private residence relief is considered when one has worked away due to employment, and this has been my case at least for first 3 years after I purchase the property. It was purchased with the intention to live in but work required me to move away in the beginning.So in short, I would give a try to claim the private residence relief and get to the bottom of this. I am tax abiding citizen and have no intention to avoid tax with any county but at the same time I don't want to overpay tax where I could be eligible for relief available for my genuine scenario.Lastly, how do you claim the private residence relief? Do I have to notify HMRC in some section in SA that I want to claim "private residence relief"? please advice.Thanks
Expert:  TonyTax replied 11 months ago.
You would report the gain in a tax return in the capital gains pages:
https://www.gov.uk/government/publications/self-assessment-capital-gains-summary-sa108
See the notes on page CGN3 here:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/420007/sa108-notes-2015.pdf
Customer: replied 11 months ago.
Just came across following guidance:"A residence which is outside the United Kingdom may qualify for relief if the conditions in this guidance are met."http://www.hmrc.gov.uk/manuals/cgmanual/cg64200.htmSo as per the legislation a main home can be outside UK.
Expert:  bigduckontax replied 11 months ago.
The argument regarding a rented property being your main residence is a very weak case. The Inland Revenue tried that one on in the mid 70s when they declared a serviceman or woman's married quarter their main residence and tried to apply CGT rules to their houses elsewhere. They emerged with a considerable amount of egg on their face when the legislative definition of 'sole of main domestic residence' was drawn to their attention. The Inland Revenue had interpreted this as 'sole and main domestic residence,' a classic and very common revenue interpretation of the law as they would like it to be not its actuality. It is thus possible that your Indian home is indeed entitled to Private Residence Relief, but it all depends upon your UK residential arrangements. However. this point is highly complex and I would be inclined to engage a local, trusted professional to advise negotiate on this matter.

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