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taxadvisor.uk, Chartered Certified Accountant
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Questions for the CA: 1. British Citizen of Indian Origin

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Questions for the CA:1. British Citizen of Indian Origin living in UK
2. Inherited agricultural land in India. (No inheritance tax was required to be paid in India).
3. Sold this land in India and purchased a residential property in India.
4. Now, the residential property may be sold and the proceeds sent to UK after paying off the CGT in India.
5. Method of calculating CGT in India:
Capita Gain = ( Sale price of the residential property minus (-) Original purchase price of the residential property x Cost Inflation Index FY 2017-2018.) x 20%.
6. If the proceeds are brought into UK, how would the UK CGT be calculated? Would it be the Capital Gain as calculated in India ( item 5 above) x by the differential CGT? Or what?
7. CGT rate in UK - 20 - 28% ?
8. Would I have to pay inheritance tax in UK for the sale of agriculture land ( Item 2 above).

Hello and welcome to JustAnswer. I am here to help you. I am reviewing your question and will respond to you shortly.
Many thanks

Customer: replied 7 months ago.
That’s fine.

Thank you for your question.

As a UK resident and UK National for tax purposes, you are taxed on your worldwide income and capital gains on arising basis.

Gain made from sale of residential property would be chargeable to CGT in the UK whether you bring the funds into the UK or leave them overseas.

In calculating the gain for UK CGT purposes, there is no adjustment for cost inflation index. Your gain is the difference between sale proceeds and cost price. Costs associated with buying and selling the property are allowed against the gain. You would claim annual gains allowance (current tax year £11,300) from the gain and the balance would be taxed at CGT rate of 18%, 28% or a combination of both depending on your total income including the gain in the tax year of sale.

Agricultural land sold in India would be subject to CGT in the UK as you are taxed on worldwide income.

You would not pay any inheritance tax on agricultural land inherited and sold in India. IHT comes into play on the demise of the person and not when one is alive.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 7 months ago.
Thanks for the response.
1. I’m a basic rate tax payer in UK; so will I be paying 18% or what?
2. CGT on agricultural land sold in India: This was bought by my parents may be sixty years ago or more; purchase documents are not there. So, how would UK CGT be calculated?
3. Is there any creative accounting available to bypass the UK CGT?
Many thanks and Rgds.
Customer: replied 7 months ago.
Please confirm that you have received my request for clarifications.
Rgds

Thank you for your reply. My apologies for the delay in responding as I was away from my desk.

1. You may be a basic rate taxpayer but if the total income including the gain exceeds the threshold for basic rate then some of the game may be taxed at 28%.

2. The gain is difference between the sale proceeds and valuation at the time you inherited it and this would apply in your case and not the cost price paid by your parents some sixty years ago.

3. As UK National and UK resident there is no creative accounting available to bypass UK CGT other than not to disclose the gain and I will not encourage that being a professionally qualified accountant in practise.

I hope this is helpful and answers your question.

Customer: replied 7 months ago.
Final clarification:
The CGT I have to pay in UK from the sale of the property in India-
1. Will it be the full wack of 28%
OR
2. UK CGT of 28% - Indian CGT of 20% ( or 2% as may applicable in India) OR UK monetary CGT amount - Indian monetary CGT amount?
Many thanks and regards.
On receipt of your response, I’ll rate you with 5*.
RS

Thank you for your reply.

First of all, your UK CGT will be calculated based on your total income. As an example, assume your taxable income after personal allowances £25,000. Chargeable gain after gains allowance £30,000. Theshold for income tax at basic rate of 20% £32,000.

CGT will be

First (32,000-25,000) 7,000 x 18% = £1,260

Remainder (30,000-7,000) 23,000 x 28% = £6,440

You claim foreign tax credit relief for CGT paid in India against this CGT £7,700.

I hope this is helpful and answers your question.

If there are no more issues, I will appreciate if you would kindly rate my service/accept the service I have provided before you leave the site, to ensure I get credited for it by Just Answer.

taxadvisor.uk and other Tax Specialists are ready to help you
Customer: replied 7 months ago.
Thank you for your patience. The last email clarifies the issue.
I’ve given you five stars and you deserve it.
Once again thanks and Rgds.
RS

I thank you for accepting my answer.

Best wishes.