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My wife and I bought an old house in Spain in 1993 and lived

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My wife and I bought an old house in Spain in 1993 and lived there up to 2002.
We moved to the UK in 2002 but rented the Spanish house.
We have a Spanish euro mortgage.
We own a house and land in the uk.
We are both resident in the uk
My wife is British and I am Irish.
What Tax will be due when we sell the property.
Submitted: 6 months ago.
Category: Tax
Expert:  bigduckontax replied 6 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

On the assumption that you did not buy an UK residence until 2002 and that you made no election to the Inland Revenue as it was then within two years of the 2002 acquisition as to which property you wished Private Residence Relief (PRR) to apply then you will be liable to Capital Gains Tax (CGT) for a proportion of the gain made on the sale of the Spanish residence. My figures assume a 2016 disposal. Only a proportion of the gain will be exposed to taxation. Your total ownership time is say 23 years and your rental period 14 years. Thus 14 / 23 [say 61%] (actually this is calculated in months not years). This, as it is Jointly owned, can be divided by two, half each. From this can be deducted your non cumulative Annual Exempt Amount (AEA) of 11.1K and Lettings Relief (LR) up to 40K. You both receive this adjustment. The balance will then be taxed at 18% or 28% or a combination of the two rates depending on the individuals' income including the gain in the tax year of disposal.

This answer takes no account of any Spanish Taxation levied. However, under the Double Taxation Convention between the UK and Spain any gain can only be taxed in one jurisdiction; the tax paid to one country being allowed as a tax credit against any liability in the other on the same transaction. The Convention does not, however, protect you from differences in tares of tax.

I do hope that you have found my reply of assistance.

Expert:  bigduckontax replied 6 months ago.

Duplicate post deleted.

Customer: replied 6 months ago.
Regarding your assumption om UK property.
We purchased land in the UK in 2002 wile renting a house for the next six years. We built a house on the land in 2008 and ceased renting.
Expert:  bigduckontax replied 6 months ago.

So, your proportion will change to 8 / 23 [say 35%]. Without quantitative data I cannot assess possible taxation liability other than in these general terms. The two way split and reliefs will still apply.

Customer: replied 6 months ago.
Thank you Keith, this is very helpful.
I should clarify that we lived in a temporary dwelling on the land up to October 2010. We then moved into the house we now occupy.
The Spanish house cost us 50.000 e
We spent another 50.000
Expected sale price 450.000 direct to buyer so no agents fees
We might consider rolling the money over into another Spanish property if there is a big advantageThanks
Dermot
Expert:  bigduckontax replied 6 months ago.

Right Dermot; firstly clarify the Spanish taxation position. Just Answer is essentially an UK based tax advice site. Your gain is 50K + 50K - 450K = 350K. Spanish capital gains are taxed as investment income at the following rates:

Up to €6,000 21%

€6,000 to €24,000 25%

Over €24,000 27%

AngloInfo Spain advise:

'Main home relief/exemption if under 65

Reinvestment relief is available to Spanish residents when they sell their main home and invest in a new one.

To qualify for this relief, the property must be your main residence and you must have lived in it continuously for at least three years (less if you had to sell because of a change of job, marriage etc.) from the date of sale or completion. You must then buy a new main residence within four years, starting two years before the sale.

Main home exemption if over 65

If, as above, you have lived in the property as your main home for three years or more, if you are over 65 years of old when you sell it, the gains are exempt from capital gains tax even if you do not buy a new property.

Again, you must be able to show you have been tax resident in Spain.

There is an excellent summary of the position here:

https://www.angloinfo.com/spain/how-to/page/spain-money-general-taxes-capital-gains-tax

Customer: replied 6 months ago.
Keith, thanks for outlining the Spanish tax situation, will check out Angloinfo.
What tax if any would then be due in the uk
Expert:  bigduckontax replied 6 months ago.

Well in view of the pretty massive Spanish Tax impost the tax credits would satisfy most of any UK CGT bill which would be at the rates in my original reply.

Please be so kind as to rate me before you leave the Just Answer site.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3119
Experience: FCCA FCMA CGMA ACIS
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Customer: replied 6 months ago.
Keith, that's great thank you. 100%
Expert:  bigduckontax replied 6 months ago.

Delighted to have been of assistance.

Expert:  bigduckontax replied 6 months ago.

Thank you for your support.

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