TaxRobin Thank you for your reply.
I am not sure I clearly understand the information that you have provided. I have gone through it portion by portion and am still confused. My thoughts on your reply are as follows:
You start by saying:
“If you sell the rental property you will be subject to CGT in the UK.”
I presume this is a general statement of principal which has been in force for a number of years but then you go on to say:
“Under many agreements, you will pay Capital Gains Tax in the country where you are resident and you will be exempt from Capital Gains Tax in the country where the gain is made.”
This, I presume is more precise to my circumstances and means that I will pay the CGT in France as there is a double taxation agreement in force between UK and France. Again this has been in place for a number of years.
You then go on to say:
“The exceptions are where either:
the gain comes from an asset that cannot be taken out of the country, for example land or a house
the gains come from assets connected with a business or trade you are running through a permanent establishment in that country”
I assume this means that I am an exception since my gain is on my land/house. You go on to clarify:
"In these circumstances you will pay tax in both countries, but the country in which you are resident will give you relief for the tax paid on the gain in the other country. If resident of France then your relief will be granted by France.
If the capital gains tax due in the UK is in excess of that paid in France you will be liable for the difference. If the tax due in the UK is less than that paid in France, you will have nothing more to pay, but you will not get a refund of the tax you have already paid in France.”
As the UK CGT liability is higher than the CGT liability in France, you are saying that I will need to pay CGT in France and then deduct the amount paid from the higher amount of CGT owed in the UK. Is this correct? Again, this seems to be referring to gains made since the house was purchased in1988.
However, You then say:
“Capital gains tax will be charged on the increase in value of the property from 6 April 2015 onwards. You would need to get a valuation of the property to show how much it increased in value from then till actual sell date.”
This is confusing as up until this statement the impression I was getting was that I would be charged for CGT from 1988. This statement conflicts with that impression. Please clarify.
Also, my original question was about what sort of valuation is required? Would an estate agent valuation suffice? Or would I need to pay (some are quite expensive) for something more detailed?
Finally, you state:
“Some predict that many foreign owners of UK property will decide to sell before the April 2015 deadline, to avoid having to pay any CGT.”
This contradicts some of what you stated earlier in your reply. It suggests (as I believed) that no CGT is currently payable in UK on rental properties where double taxation agreements exist, until it is introduced in April 2015.
I had been led to believe that prior to April 2015 CGT is payable in France and that after this date it will be paid in UK. Is it possible for you to be more clear and specific on this point please. Note, it makes a big difference to me as France does not charge CGT on properties that have been held for 30 years or more and the charge diminishes on an annual basis from the 7th year of ownership to the 30 year point.
Finally, we are only in France to look after elderly parents. What would happen if we did not sell the house at this stage but moved back into it after my parents died, as we had always planned? We do not want to get old in France. How long would we need to live in the house before it became our principle private residence again and exempt from CGT.
We look forward to hearing your further thoughts. Thank you. Linda Bodie