Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.
CGT in the UK doesn't work in the same way as it does in Australia where the assets of an immigrant are valued at the time that individual arrives in Australia so that only the gain which accrues since their arrival is taxed. The whole period of ownership is taken into account in the UK so if your friend was UK tax resident in the tax year he or she sold what was their main home in Australia, there may be CGT to pay in the UK.
Take a look at HS283 here, in particular Example 9. As a proportion of the whole gain, that part covered by the owners's occupation of the property will be exempt from CGT as will that part of the gain covered by the last three years of ownership. Letting relief will also be due for any period not covered by the owner's occupation of the property and the last three years of ownership. That will be the lesser of:
2 the sum of the gain covered by the owner's occupation of the property and the gain for the last three years of ownership and
3 the gain for that part of the letting period not covered by the periods in 2 above, (probably 1 year of the last 4 years of ownership)
If there is a UK liability to CGT, had any CGT paid in Australia on the same gain, it would have been deductible from the UK liability.
I hope this helps but let me know if you have any further questions.
As I said in my previous post, the whole period of ownership is taken into account for UK CGT purposes, ie 2001 to 2012. Assuming the property was occupied by your friend from the month in 2001 she bought it until the month in 2008 she moved out, that part of the gain will be exempt from CGT. That leaves 4 years or so. The last 3 years of ownership will also be an exempt period. The remaining year will probably be covered by letting relief.
As a non-UK domiciled individual, ie not British, the only way your friend could avoid UK CGT if there was a net taxable gain which I doubt would have been not to remit the gain from the sale of the Australian property to the UK. See section 9 of RDR1 here.
Letting relief cannot used against rental income.
If there is no taxable gain in the UK after all reliefs, there is no need to make a claim for the remittance basis of assessment to apply. It may be too late to make such a claim in any event.
I would need to know the UK currency equivalents of the purchase price as at May 2001 and the selling price as at August 2012.
You have to make a claim for the remittance basis to apply for a tax year when unremitted income is £2,000 or more in a tax year. You do that by completing tax returns. Once a non-UK domiciled individual has been in the UK for seven of the nine previous tax years, if they want to use the remittance basis, it will cost £30,000 per tax year to do so (the remittance basis charge). It will be less expensive in most cases to pay UK tax on worldwide income unless the non-UK income that isn't remitted to the UK is very high.
You have to use the rates effective at the time of purchase and sale. Are you saying that the exchange rate was the same in May 2001 as it was in August 2012?
If the gain was £265,000 (A$950,000 / 2 - A$420,000 /2), then the gain will be split between the period of occupation by the owner (including the last 36 months of ownership) and the letting period as follows:
Occupation and last 36 months gain (exempt): £241,618 (£265,000 / 136 months x 124 months)
Letting period gain: £23,382 (£265,000 / 136 months x 12 months)
Letting relief: £23,382 (lesser of £40,000, £241,618 and £23,382)
Taxable gain: £0
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