mordechaivanunu

Hi
Does anyone have any info on how the proposed changes to capital gains tax on UK property, could effect the likes of us, who have bought a house in Australia but still have our home in the UK?

Cheers

al dente

If you are from the Uk orginally you are domiciled to Scotland or England and Wales. I do not know about N.I. That means any assets around the world will be liable to the IHT laws of your Domicile of Origin.

To change your Domicile (Domicile of Choice) is very costly and difficult. It is also not finally confirmed until your death during probate. Even mentioning that you want to some ashes scattered in the UK can negate the change of Domicile.

It is very difficult to do because of the obvious tax avoidance benefits.

louie

But the OP was asking about capital gains tax.....

The changes make no difference to you if you are neither resident nor ordinarily resident in the UK nor return to the UK within five years or so of selling up. If you have moved to Australia and stay indefinitely, you will have no UK CGT liability. See http://www.hmrc.gov.uk/worksheets/2009/sa109-notes.pdf page RRN27.

JAJ

Make your will in Australia, and have your assets outside the UK, and there is no practical basis for UK IHT to be levied. Australia will not collect it on Australian estates. Suggesting otherwise is just scaremongering.

As to the original question about UK CGT, post #3 is correct, as far as I know. Unless the law changes to make UK-located assets subject to UK CGT.

Centurion

That's not the case. Just because you are from the UK originally does not domicile you there for tax.

http://www.hmrc.gov.uk/cto/customerguide/page20.htm for the boring IR official line on the subject. Basically for many people (and indeed each case is unique) it means that if you have not been resident for 4 years before death then your estate will not be subject to UK IHT on any UK or AU assets.

Having just gone through this crap with an estate, and whilst off topic for a moment, this nonsense just highlights the continued utterly unjust tax that on death that the UK levy. As JAJ says though if you have no assets in the UK at all the money grabbing blighters can go whistle since you don't need probate from there.

On topic - CGT, as mentioned is an entirely different game and louie's answer above is excellent.

Swerv-o

Yes, I was hoping to see some IHT reform under a Tory government, but it looks like it's been shelved until the next parliament, assuming they win an overall majority then.


S

al dente

Oh dear! I went to bed and realised i'd answered about IHT and not CGT and felt like a numptee.

However, we have just been receiving Legal advise about IHT in regards to domicile of origin and trying to change it and have been advised that IHT will be levied on estates outside of the UK. This is why we were thinking of changing our Domicile of Origin to Domicile of Choice (Aus) to avoid it.

Do Aus and Uk have reciprical tax agreements? I know we were asked to declare any property in the UK, though can't remember what for, whether it was for tax of for mortgage.

(accusing me of scaremongering is a tad aggressive)

al dente

thanks for that.

JAJ

And do tell me exactly how that can be done?

I will observe that if you have severed all ties to the UK (assets in Australia, will in Australia, etc) and permanently settled in Australia then you have lost your UK domicile, anyway.

If you die in Australia, the UK will not even know about your estate and they cannot levy an estate tax on a non-UK estate anyway. There is a lot of unnecessary scaremongering over this.

al dente

Apols to the OP, what with my dizzy confusion between CGT and IHT i really have confuse materrs

However... What's with the 'scaremongering'?? I'm only repeating what i've been told by my solicitor as we're bang in the middle of updating our wills. Of course, you could avoid the tax and not declare any of your aussie property but that's not entirely honest (and we are trying to find ways around it). We have property in both the UK and Oz and off shore bank accounts so have not severed all ties. To compound matters we live in the UAE with sharia law so are trying to avoid that as well. Our bank here is connected to both our mortgage accounts by virtue that we send money home so our properties are very easy to find. That's fine, we know that. I'm hardly spreading 'wild and unsubstantiated gossip' here.

JAJ

You? Inheritance tax isn't levied on "you", it's levied on your estate. By that point, you're dead so you're not in a position to avoid/evade anything.

It will always apply to property situated in the United Kingdom.

Here's how it is. Right now, if you're not settled in Australia, you may still be UK domciled. But if you settle permanently in Australia, for the rest of your life, it will be hard for anyone to argue that you remain UK domiciled. And since the UK Revenue does not have any involvement in Australian probate proceedings the question won't ever arise.

You should discuss with your solicitor whether it would be better to have a UK will for UK assets, or cover them with your Australian will.

Bermudashorts

It is extremely difficult to change your UK domicile status. One would have to be out of the country for at least 17 years before domicile can be changed and if one were to die before such time then UK IHT would apply to the estate of the deceased.

Anyway the initial question appears to be about CGT not IHT.

Firstly as somebody else said there is no UK CGT so long as you are non resident for at least 5 years. However, as you have bought another property in Australia there could be Australian CGT if there is a gain to be taxed of course.

Even if you do not end up non resident for 5 years, a charge to UK CGT is unlikely for most of us. The final three years of home ownership will always be treated as if you lived there, any gain is pro-rated over the entire period of ownership and then you get a £40,000 exemption for letting relief and then there are personal allowances x 2 if the property is in joint names. So you would have had to rent the house out for more than the last three years and made a rather large profit to be caught up by UK CGT following the sale of what has been for the most part, ones main residence.

JAJ

Not if the estate (will) and assets are outside the UK.

Bermudashorts

"Generally, if you are domiciled or deemed to be domiciled in the UK then IHT applies to all taxes regardless of where the asset is situated". Per HMRC.

And as per my last post, it is very hard to change one's domicile, it is not simply a case of moving overseas.

http://www.hmrc.gov.uk/cto/customerguide/page20.htm#7

JAJ

Sigh.

The power of the UK to tax ends at the border. The UK has no more power to tax an Australian estate than Uruguay has and all the laws in the UK make no difference to that fundamental reality.

Now if assets are left in Britain it may be a different situation.