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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15950
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am a UK citizen with a home here but have been living and

Customer Question

Hi. I am a UK citizen with a home here but have been living and working for nearly 5 years in Abu Dhabi. I bought a property out there 3 years ago and hope to sell it before I return to the UK in which case I assume there is no CGT. However if I return after 5 years (next June) but have not sold the property by then I need to know how it will be treated for CGT when I eventually sell. I bought it from my tax free earnings made in Abu Dhabi. Also I may rent it out after the 5 years if not sold so will have offshore earnings in USD.
Would much appreciate your help.
G. J. Nichols
Submitted: 10 months ago.
Category: Tax
Expert:  TonyTax replied 10 months ago.

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.

Customer: replied 10 months ago.
Tony, OK fine. Thanks. Graham
Expert:  TonyTax replied 10 months ago.

You will be treated as any other UK resident if you sell the Abu Dhabi property after your return to the UK. It's cost for CGT purposes will be what you paid for it, NOT what its value is at the time of your return to the UK. You would be well advised to sell it before you return to the UK.

If you let the property after your return to the UK, the rental income will be taxable in the UK. If any tax is paid on that income in Abu Dhabi, then you will be able to offset it against your UK tax liability on the same income.

I hope this helps but let me know if you have any further questions.

Customer: replied 10 months ago.
Tony, So if I sell it after returning to the UK I am liable for CGT on the initial purchase price even though that was when I was non-UK resident. Is it not pro-rated in some way to reflect the period I was away vs the period of ownership after I returned? Also seems strange to be on the initial purchase price but I guess that is a good thing. How is that a gain if that was my initial price?Graham.
Expert:  TonyTax replied 10 months ago.

As I said in my previous post, you don't get any relief for the period you were out of the UK. However, if the property is AD has been your main hone, then you will get exemption from CGT for the period it was your main home and a maximum of the last 18 months of ownership when you may not have lived in it. See HS283 here.

A capital gain is the difference between what you sell an asset for and what you paid for it. I don't see what I said in my previous post that makes you think you pay tax on the purchase price. You pay CGT on capital gains which you may make when you sell assets. You don't pay CGT on a purchase price.

Customer: replied 10 months ago.
OK when you said cost I read that meant liability for CGT - my mistake. Yes I see that CGT is on the difference between sale and purchase price. If the AD property was my main home for the period I lived there then my home back in the U.K. would lose PRR for that period?
Expert:  TonyTax replied 10 months ago.

It can't really be your main home if you are living in the UK and the property is in AD which you don't intend to return to or its let or you are trying to sell it. However, you do get the last 18 months of ownership as a tax free period so if you sell it after your return to the UK, you do have a buffer period. Then, if you haven't sold it, each day's gain as a proportion of the whole gain is a taxable gain. ie tiny, about 1/1,000 in your case given you have owned the property for three years. If you let the property, then you may get letting relief for any period not covered by your occupation of the property and the last 18 months of ownership.