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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15842
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am planning to sell a property in India jointly owned

Customer Question

Hi, I am planning to sell a property in India jointly owned by me and my wife and have questions related to CGT in India and UK
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. I can help with the UK tax situation so would you like to ask your question?
Customer: replied 1 year ago.
Yes sure. Here it goes
Hi. we are selling a property in India that me and my wife had bought in 2002 for approx GBP 28000 (CONVERTED). We expect to sell it for GBP 260000.
As per India Capital gains tax, I need to pay CGT at 20% as a deduction at source.
We have lived in the UK from 2005 to 2012 and then back again from 2015 June. We became British citizens in September 2011. Before that we have been a citizen of India from birth.
My question is: if I transfer my entire sell proceeds to UK, what is or tax liability?
Customer: replied 1 year ago.
Just for your information, my wife is in the 18% CGT slab and I am on 28%. So can I declare the entire proceed on her name?
Customer: replied 1 year ago.
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Expert:  TonyTax replied 1 year ago.
Thanks. Was the property ever your main home? Did you own a property in the UK at the same time as the one in India? Can you tell me when in 2005 you came to the UK, when in 2012 you returned to India and when in 2015 you returned to the UK.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15842
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
TonyTax and 2 other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Yes, the property was my main home from September 2003 to May 2005 when I moved to UK. In between from June 2012 to June 2015 I was on an assignment in Thailand and not to India
Customer: replied 1 year ago.
I owned a property in UK from May 2008, nothing before that
Expert:  TonyTax replied 1 year ago.
My calculations will take a while so please bear with me.
Customer: replied 1 year ago.
No problem Tony
One more question just thought about. Between 2005 to 2008 (while I lived in UK but didn't own any property), every year I went back to India for upto a month/year and stayed in the property in discussion. Does that help to qualify it as primary residence during that period?
Expert:  TonyTax replied 1 year ago.
If you sell the property in April 2016 for £260,000, you will make a gain of £232,000. You can also deduct the costs of purchase and sale (legal fees, stamp duty, survey fees, selling agent fees). Total period of ownership to April 2016: 152 months Period of owner occupation: 21 months Period of vacancy: 131 months Exempt gain: £59,526 (£232,000 / 152 months x 39 months (21 months + last 18 months of ownership)) Vacant period gain: £172,474 (£232,000 / 152 months x 113 months (131 months - last 18 months of ownership)) Gross Non-Exempt Gain: £172,474 Individual shares of gain £86,237 (£172,474 / 2) Annual CGT Exemption: £11,100 Net Taxable Gain: £75,137 (86,237 - £11,100) For a 40% taxpayer, the CGT will be 28%. For a basic rate taxpayer, the first £32,000 of income taxable after deduction of the personal allowance of £11,000 in 2016/17 will be taxed at 20%. Any unused part of the 20% tax band can be used to tax part of the gain at 18%. The balance will be taxed at 28%. If you do pay CGT in India, that will be deductible from your UK CGT liabilities. I wouldn't be inclined to claim for the odd month you lived in the property in India as that would have to be reflected in any calculation of a gain on the sale of your UK property. Refer to HS283 for information on the main residence and CGT. Look at RDR1 for information on domicile. There is information on Business Investment Relief here and information on proposed changes here. You would have to claim the remittance basis of assessment if you wanted to claim BIR. If you did, you would lose your UK personal allowances and you may be liable for the remittance basis charge though, technically, you were non-UK resident from June 2012 to June 2015. I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
Tony, thanks for the numbers, very useful. Given your calculation, I assume we will have to pay roughly around 21K GBP each towards the CGT. But if we transfer the property to any one of us and go the route of non-dom remittance basis, I understand since we belong to the category of less than 7 year resident out of last 9 years, we pay 30K GBP as fixed sum. This will be less than the 42K combined in case of domicile basis. I guess only problem will be I can't bring the money to UK, but can you please tell me how long do I need to wait before I can bring that sum in without paying additional tax?
Expert:  TonyTax replied 1 year ago.
You need to remember that if you claimed the remittance basis of assessment for the tax year of the property disposal, you would lose your personal allowances which are worth £6,600 (£11,000 x 40% + £11,000 x 20%). Unremitted non-UK income and gains which arise after your arrival in the UK will be subject to UK tax if they are brought into the UK many years after they arose. The remittance basis charge increases the longer you are resident in the UK. The £30K charge doesn't kick in until you have been resident in the UK for 7 of the 9 previous tax years. If you claimed the remittance basis of assessment to avoid paying tax on the gain and you have not been in the UK for 7 of the 9 previous tax years, you would not be liable for the RBC. The gain would still be taxable when you eventually remitted it to the UK but the RBC you paid would be offset against it so you could still have CGT to pay in the future depending on tax rates in the future. If you remitted the gain to the UK as soon as you have the money and didn't claim the remittance basis of assessment, you would just pay the UK CGT. By the time 2016/17 is over, you will probably have been resident in the UK for 7 of the previous 9 tax years.
Customer: replied 1 year ago.
Hi Tony, given the 2016 Budget statement, 'Capital Gains Tax rates will be reduced from 28% to 20%, and from 18% to 10%. There will be an 8% surcharge for gains on residential property. This is effective from 6 April 2016', can you please update the calculation you did for me?
Expert:  TonyTax replied 1 year ago.
It's too early to do that. The detailed proposals have yet to be published.

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