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bigduckontax
bigduckontax, Accountant
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I am wanting to know what taxes myself and my father would

Customer Question

I am wanting to know what taxes myself and my father would be subject to if I were to sell a property my father gifted me 6.5 years ago. The property is in portugal. I also need to know if it would benefit me waiting until I have had it in my name for 7 years or if this irrelevant?
Submitted: 7 months ago.
Category: Tax
Expert:  TonyTax replied 7 months ago.
Hi. Are you and your father UK nationals who are resident in the UK? Is the property in Portugal a holiday home?
Customer: replied 7 months ago.
Hi, Yes, we are both UK nationals and resident in the uk. The villa is a holiday home. It is owned by a maltese company that my father set up. He gifted me the shares of the company. We do not rent out the villa, it has been for friends/family use only. We need to sell it as I can not afford the running costs, but obviously dont want to sell it yet if the taxes I pay now, will decrease if I hold on to it for a little longer.
Many Thanks
Expert:  TonyTax replied 7 months ago.
The fact that the property is owned by a Maltese company, not you, is significant and complicates matters. If you were simply selling the shares, it would be straightforward. I will have to opt out as I know nothing about the Maltese tax system. Another expert may take the question on.
Expert:  bigduckontax replied 7 months ago.
Hello, I am Keith, one of the experts on Just Answer and pleased to be able to help you with your question. Maltese companies are liable to Income Tax (IT) on their trading and capital gains. This tax is at 35% although capital gains may be taxed at anything between 0 ans 35%. Deloittes advise that the effective rate of tax on immovable property is of the order of 12%. You can find their article here: http://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-maltaguide-2014.pdf I do hope that you find my reply of assistance. '
Customer: replied 7 months ago.
Many thanks Keith, what are the taxes we will be subject to in the UK though. In essence, I suppose the main thing I am trying to work out is if it makes a dinference in tax if I sell now or wait until it has been in my name for 7 years. ( or is that only relevant on inheritance tax if my father had passed away?). Many thanks
Expert:  bigduckontax replied 7 months ago.
Under the Double taxation Convention between the UK and Malta any tax paid there is allowable against any UK liability on the same income stream. You have got it nearly right, the seven year rule applies to gifts and UK Inheritance Tax (IHT). A gift creates a Potentially Exempt Transfer (PET) in your Father's IHT affairs. PETs run off at a taper over 7 years and in the event of a decease within that period are added back to the deceased's estate for IHT. PETs are the first to suffer the tax and if the estate is insufficient to meet the tax on the PET the liability cascades down to the beneficiary for immediate payment so cross your fingers for another 6 months! When your father disposes of the company there may be a liability to Capital Gains Tax (CGT). Please be so kind as to rate me before you leave the just Answer site.

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