Dondurma

Hi

I am aware that if you sell your U.K. home to move to Spain in the same year you become tax resident in Spain-you will be liable in Spain to tax on the sale of your U.K. home

What I would like to know is are you taxed on the full sale price you receive for your UK home or is it only on any profit made?

Fred James

You are only ever taxed on the gain - the clue is in the name capital Gains tax.

snikpoh

... and that can be quite complicated as it's on a sliding scale (length of ownership) and there are allowances for reformation etc.

Dondurma

Fred I knew the G meant gain however I was off the opinion that the Spanish viewed the sale price of your U.K. home in its entirety as a gain if you already had a Spanish home

Fred James

Most of the allowances for length of ownership have been abolished and, yes costs of reformations and improvements can be deducted. Yes, it's certainly complicated!

Dondurma

Fred

I am hopeless with this sort of stuff so could you tell me if I am correct in my figures

Bought UK house £105k
Sell £195k

So as long as new place bought within 2 years in Spain was over £90k there's no CGT to pay in Spain

Thanks

Fred James

To get the "roll over" relief, you must reinvest the proceeds of the sale, not just the gain. If you are over 65 then the gain is exempt.

In both cases the house must have been your habitual residence for three years to qualify for this relief. There are some exceptions to this rule such as moving for health, moving job, divorce death etc.

Dondurma

Cheers
So I was right. The CGT isn't just on the gain in my scenario but the whole sale price. Thanks for your help

Fred James

No, you still haven't got it right. The tax is payable only on the gain, but if you want to avoid paying any tax, you must reinvest the whole proceeds of the sale.

If you only reinvest half of the proceeds, you will only avoid tax on half of the gain.

Dondurma

I am sorry -have got you now

Basically I am screwed lol

Bought UK house 105k
Sell it for 175k
Spanish house 135k

Thanks for your help I find these things very difficult

I will just have to make sure I do not become tax resident in same year as UK house sale

scot66

Can someone clear up CGT RULES. If I sell in UK after July 2017 and move to Spain before 31 Dec 2017 would i avoid being liable for CGT in Spain. Also, if I intend to stay in Spain when do I become resident, is it after 183 days?

Fred James

You would not be liable, but the rules are simpler than you imply.

You only pay CGT if you are Spanish tax resident at the time the house is sold.

The 183 day rule usually applies and that is 183 days in any one calendar year. On top of that, you are deemed tax resident for the whole of that qualifying tax year, even if you only spend part of the year in Spain.

So, taking an extreme case, you could move to Spain in July and sell your house in December and you would not be liable for CGT as you would not have been tax resident at the time of the sale.

guirijohn

To be completely safe from Spanish taxation on the sale of a U.K. home, the move to Spain should be delayed until the calendar year after the sale.

Presence in Spain of 183 days or more is one test of residence. But a person is also tax resident if, “His base, or centre of economic interests is directly or indirectly in Spain” “It is presumed, unless proved otherwise, that a taxpayer has his usual place of residence in Spain when his spouse and minor children are permanent residents in Spain.” (Agencia Tributaria quotation)

Each case will be decided on its merits, but a person who sells his U.K home and moves his family to Spain is, prima facie, resident in Spain in the year of arrival. In the past the Spanish tax authorities have not had knowledge of overseas transactions so there was little incentive to launch speculative enquiries. This has changed with the comprehensive exchange of information clause in new Tax Treaty between the U.K. and Spain…

“If information is requested by (Spain) in accordance with this exchange of information clause, the (U.K.) shall use its information gathering measures to obtain the requested information, even though the (U.K.) may not need such information for its own tax purposes”.

Spanish taxation of the gain on sale of a U.K. main residence, with no corresponding U.K. tax credit, could lead to a significant liability if the proceeds are not reinvested. Additionally there is the probability that the new arrival will not have declared his assets in a 720 declaration.

The risk exists so it is as well to be aware of it whilst something can be done. If in doubt I would take professional advice.

There is an explanation of the residence rules here.

https://www.spenceclarke.com/articles/to-be-a-resident-or-not-to-be-that-is-the-question

scot66

This seems like madness. I sell my house in the UK and the Spanish tax authorities are entitled to a a cut. I accept this is the case but it seems really unfair.If I bought and sold in Spain I just have to put up with the ridiculous costs and taxes because I choose to live there but why what profit I make on selling in the UK has anything to do with them is hard to understand.

And now it seems that if I sell in the UK , I will have to hand over my house on 31 Dec to avoid having the huge upheaval of renting for a time in the UK.

I have always thought that there is no point in moaning about Spanish taxes etc as if I want to be there I just have to suck it up but the more I investigate the more I understand why people advise only living there for 6 months and keeping your main life in the UK.

Horlics

I've been doing the 6 here 6 there thing and I've grown tired of it. I don't like leaving my UK house empty for 6 months of the year; issues of security and insurance validity. I seem to own two of everything. I pay all year round for services I don't use for 6 months in both the UK and Spain.

I am sure that paying a bit of extra tax in Spain will be cheaper than maintaining the current situation.

I recommend sucking it up.