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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15977
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am currently a US resident and have been since May 2012. I

Customer Question

Hi I am currently a US resident and have been since May 2012. I have a property there and am a high level income earner.
I have some properties in the UK which I rent out and am considering disposing of one.
It was bought in 2001 for £97000.00, I have rented it out since and never resided in it, I have spent a total of £43000.00 in improvement/renovation costs and looking to sell it for £230000.00.
Please can you advise me of the most tax efficient way of dealing with this and what the capital gains tax cost may be to me, also would this be taxed in the UK or the US?, if I sell it would most probably complete January 2017.
Many thanks.
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year 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.

Expert:  TonyTax replied 1 year ago.

Gains made by non-UK residents on UK residential property became taxable in the UK with effect from 6 April 2015 as you can read here and here. There are three ways you can work out the gain but as you have owned the property you wish to sell since 2001, the most beneficial way to calculate the gain will almost certainly be to use the 5 April 2015 value of the property as your "cost" for CGT purposes instead of the original purchase price. The first £11,100 of gains made in the current tax year will be tax free. CGT on residential property gains is charged at 18%, 28% or a combination of the two rates depending on the level of your UK income in the tax year the gain is made. Look here for information on how to work out your CGT rate.

Since you have never lived in the property, the only relief you will get will the annual CGT exemption as mentioned above. However, you will only pay CGT on the difference betwenn the net of selling costs disposal preceeds and the 5 April 2015 value of the property assuming you choose to use the 5 April 2015 value as your base cost.

I'm not an expert on US tax but I strongly suspect that the gain will be taxable in the USA and if it is, then you will get credit for any UK CGT paid against the tax you pay in the USA. Clearly, the gain will be worked out in a different way for US tax purposes compared to the way used for UK tax purposes. Any disposal must be reported to HMRC in the UK within 30 days of the sale using the form here.

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

Customer: replied 1 year ago.
Hi Thanks for this, all renovations only took place in the last few months, could these be used?
Expert:  TonyTax replied 1 year ago.

Yes, you can.

Expert:  TonyTax replied 1 year ago.

I have to go out for a while but will be back in 30 minutes or so.

Customer: replied 1 year ago.
Ok so basically, marketable value at 05/04/15 less renovation costs and solicitors/conveyancing/estate agency fee less 11100, what about process taken into account through l/etting over the years, how are these dealt with or are they dismissed after each self assessment declaration though out the years
Customer: replied 1 year ago.
Can you also please confirm that there is a one off fee for your replies
Expert:  TonyTax replied 1 year ago.

Yes. Follow up questions on the same topic are not charged for.

Expert:  TonyTax replied 1 year ago.

I'm not sure I follow your question about letting.

Expert:  TonyTax replied 1 year ago.

As far as the CGT situation is concerned, the letting is irrelevant.

Customer: replied 1 year ago.
do any costs/allowances need to be brought back in or just ignore or previous letting income and expenditure and just deal with CGT completely separate?
Expert:  TonyTax replied 1 year ago.

The letting side is done and dusted assuming you have been dislcosing the rental income and expenses. Any expenses claimed against rental income cannot be claimed against the capital gain.

Expert:  TonyTax replied 1 year ago.


I'm just following up to find out if my answer helped or if you have any further questions.