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I have a client that previous rented out a property in

Resolved Question:

Hi
I have a client that previous rented out a property in Portugal but sold it during the 2015/16 tax year. He is using some of the proceeds to refurbish his property in London which he will shortly let out once it is completely refurbished.
I would like to know whether he would be entitled to rollover relief as an individual since he will be using some of the proceeds to let out another property and therefore reduce his capital gains tax liability on the sale of the portuguese property?
Thanks
Kind regards
Paul
Submitted: 3 months ago.
Category: Tax
Expert:  bigduckontax replied 3 months ago.

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

Bad news I'm afraid; here is the relevant precedent [source: Gabelle, Expert Tax Support]:

'The First-tier Tribunal – in Elizabeth Moyne Ramsay TC01871 – published on 23 March 2012 – has disallowed rollover relief in relation to a property letting enterprise on the basis there was no ‘business’ being carried on. This is a significant decision. It suggests that what might previously have been identified as sufficiently active management may not, if fact, be enough.'

Regards

Keith

Customer: replied 3 months ago.
Therefore, there is no longer any relief available although he is ploughing the proceeds into a new venture?
Thanks
Paul
Expert:  bigduckontax replied 3 months ago.

No, he will be liable for Capital Gains Tax (CGT) on any gain made less his Annual Exempt Amount (AEA) of 11.1K If he ever lived in the property before letting he may be entitled to Lettings Relief (LR) up to 40K also.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3101
Experience: FCCA FCMA CGMA ACIS
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Customer: replied 3 months ago.
Thanks but that wasn't the case for him.
Expert:  bigduckontax replied 3 months ago.

So he just has the AEA of 11.1K to relieve the gain plus any Portuguese Tax deducted under the Double Taxation Convention between the two countries which is allowed as a tax credit against any UK liability.

Thank you for your support.

Expert:  bigduckontax replied 3 months ago.

And your kind bonus.

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