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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi I am intending to sell my house in France. With any luck

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I am intending to sell my house in France. With any luck i will get about €500k, having bought the property back in 1995 for €130k. I am now trying to inform myself about UK CGT liability.
I have established that I will have to pay French tax on the sale of the house of about €50k. This sum is extremely complex to calculate and I have relied on a French lawyer to arrive at this estimate. Oddities of the French system are that a) you can only offset very limited improvement costs and b) the tax is actually spit into two, broadly equal elements, described as a capital gains tax and a social charges tax although, by common agreement, the tax is in effect a single capital gains tax.
The fact of the matter is that i have spent about €320k on improvements to the house over the years and would, if it were in the UK, have hardly any CGT to pay. However the French will not let me offset most of these improvement costs. I have all the documentation.
I have two questions:
1 Will I be able to offset improvement costs in full against the capital gain for the purposes of calculating UK CGT? Or might the UK HMRC argue that because the French wouldn’t let me offset the costs then they cannot be offset against UK CGT?
2 Will I be able to offset the full €50k tax paid in France against UK CGT even though part of the French tax is described as a social charge?

1 The improvement costs can be added to the cost of the property along with the costs of purchase and sale to arrive at the sum deductible from the disposal proceeds for UK CGT purposes. What the French tax system allows or disallows is irrelevant. HMRC may ask to see proof of the improvement expenditure in the form of receipts and invoices.

2 I'm afraid that the social charge element will not be deductible from any UK CGT liability as it is not a tax. Take a look here for more information. However, you may be interested in this.

I hope this helps but let me know if you have any further questions.
I have to go out for about 30 minutes but will be back to answer any follow up questions that you may have.
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