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TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Capital Gains Tax query on overseas (Indian) property sale

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Capital Gains Tax query on overseas (Indian) property sale (and related questions).
My details:
In UK for almost 7 years
On Indefinite Leave To Remain in the UK.
Higher Rate Taxpayer.
Flat purchased in 2012, and to be sold soon
1. My parents and I were born in India, and I have all my family ties there. But given I have ILR now, can I still claim Indian domicile? I have no firm plans in the UK to settle yet, but given the ILR status, not sure how it works tax wise. Also, if I buy a property in the UK would that make a difference to the domicile (I am still renting)?
2. Given there is UK-India double Taxation Treaty, can I pay tax in India and then claim relief in the UK up-to the amount paid in India and pay the balance if any in UK based on UK Tax calculations?
3. The main question, how to calculate CGT in my case. Broken down into subquestions:
a. Flat in India purchased with 75% investment from me, and 25% from my father. For UK tax purposes, is the ownership based on the initial investment ratio, or is it assumed to be 50/50 based on ownership in the joint name of two individuals - the registration in India does not specify any specific %, its just in joint names?
b. I am assuming that I convert the purchase price at 2012 FX rate, and sale price at current FX rate, and then take the difference of these numbers to calculate the profit (rather than calculating the profit in Indian rupee first and then converting it at the present FX rate). The two ways give very different numbers due to the massive change in FX rates, so I just want to make sure.
c. With the above assumptions, my calculations are (please confirm if correct)
i. Purchase price = GBP 30,000 (at 2012 FX rates)
ii. Sale Price = GBP 80,000 (at 2015 FX rates)
iii. Net profit = GBP 50,000
iv. My taxable profit (assuming 75% share of the ownership) = 75% of GBP 50,000 = GBP 37,500
v. Less Capital Gains Allowance (GBP 11,000) = GBP 26,500
vi. Tax = 28% * GBP 14,000 = GBP 7,420

1 I'm not an immigration expert but your tax domicile won't be affected by your being given indefinite leave to remain. You will remain as domiciled In India, at least for now, so if you left your share of the gain out of the UK, you could choose to be taxed on the remittance basis which you can read about in section 9 here. Buying a property in the UK makes no difference, at least not now.

2 If the gain is taxable in India, the UK/India double tax treaty will ensure that the tax paid on the gain in India will be deductible from the UK CGT liability. If there is a shortfall, then you will need to pay the balance.

3a You will be taxed in the UK on the basis of your ownership share.

3b You use the exchange rates at the time of purchase and the time of disposal. You can use the spot rates on the relevant days or the average rates for the UK financial year which ends on 31 March. Look here for exchange rates.

3c The calculations are correct. The rate of CGT that you will pay, 18%, 28% or a combination of the two, is dependent on the level of your income in the tax year of disposal.

I hope this helps but let me know if you have any further questions.
Customer: replied 3 years ago.

Hi Tony,

3a. is not sufficiently clear yet.

To be clear, there is no ownership share defined as such in the property registration documents as such, its simply in the joint names of myself and my father. So I would have assumed it will be 50/50 (which is what is assumed under Indian tax system).

Just want to make sure I understand your answer clearly. Are you saying in my case under UK Tax, I will be assumed to have 75% share in ownership of the property, since the invested 75% of the initial purchase price?

The ownership should be split in whatever proportions you agreed with your father at the time of purchase. Given that you contributed 75%, that would usually mean that it is 75:25. However, if the ownership is different to the original contributions, use that.

HMRC may ask for evidence of the agreed ownership proportions.
Customer: replied 3 years ago.

Thanks Tony. Last clarification, is on pt. 1, am I correct in saying that the seven year time window does not make any difference to the domicile, rest all being the same? i.e. If I sell the property in say 1 or 2 years time rather than now, after having lived in the UK for 8 or 9 years, I would still be domiciled in India ?

The seven year time window is the period that you have before you will need to pay the remittance basis charge in the UK if you use the remittance basis.

Domicile is difficult to change. You will still be domiciled in India after 8 or 9 years unless you broke all your connections with that country and took UK domicile by choice. See section 5 of RDR here.
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