jacknscoob

Hi Guys

Scenario:

• As a Pomme, I bought and lived in a house 20 yrs ago in the UK
• For the last 10 yrs it has been rented out (I have been in Oz) although estate agents thought I was in the UK
• I have now moved back to UK and it is my primary residence
• I now am selling the house (no mortgage), going back to Oz

What are my options re Capitol Gains Tax?



Thanks in advance

louie

You don't have "options"! If you already complete an annual UK tax return, as I imagine you do as you have been in receipt of rental income, it goes on there. If not, you tell the Revenue you have made a taxable capital gain and they will issue a return for completion at the end of the year.

This assumes you are a UK resident (you don't say how long you have been back/are planning to stay in the UK). If not, the rules have recently changed so the tax has to be paid within I think 30 days instead of 31 January following the end of the tax year. I'm not up to speed with the changes but I imagine the solicitor would hold back the tax.

In round terms, you'll pay CGT on about 35% of the gain less £40k if you lived there for the first ten years.

Scotty1

https://www.gov.uk/tax-relief-selling-home

There is a tool you can use that helps you work it out. Depends on your residency and size of house etc

Bermudashorts

Tax law does not provide options! And certainly not retrospectively.

I would probably engage an accountant to calculate the tax. It will be prorated between when you lived in the house and when it was rented out, plus there are other allowances, letting allowance, annual CGT allowance. CGT on sale of house is not usually as bad as people think it will be.

As an aside, why did the estate agents think you were in the UK when it was rented out previously? It would have been fabourable for them to have known you were overseas and that way they would not have withheld tax from your rental income.

louie

I think you've got that the wrong way round. Letting agents are obliged to deduct basic rate tax from rental income paid to non-residents and pay it over to HMRC unless HMRC instruct them not to after application to them by the non-resident. If the OP's agents did not know he was abroad, they would have paid him in full.

Bermudashorts

Nope. I don't have anything the wrong way around

Letting agents are obliged to deduct basic rate tax from UK residents rental income. Non residents can apply to have it paid over without tax deducted by filling in form NR01 on the basis that the profits are likely to fall within the personal allowance and hence no tax due.

If the letting agent thought she was in UK then they definitely would have deducted the tax. Had they known she was overseas they could have arranged to pay over before deducting tax.

louie

There is no obligation, indeed no process, for letting agents to deduct tax from UK resident's rental income.

Bermudashorts

I am going to bow to your superior knowledge on that one then. But gosh well I never I always thought they did, perhaps just because my only experience of being a landlord was when I was overseas.

What a stupid process then. So somebody announces they are going overseas so agent has to start withholding tax but then many will promptly apply to not have tax deducted!

jacknscoob

Hi Guys

Thanks for your input. Here is some additional info.

According to my statements it looks like I have been paying 20% VAT which the agent has taken automatically.

Someone mentioned "If you already complete an annual UK tax return, as I imagine you do"......I have never been asked to complete a tax return and never have. When I was working in the UK years ago, the tax was automatically taken from my wages.

Bermudashorts

You pay VAT on the managements fees, that is normal.

HMRC will often request a return, but if they don't request it, it doesn't mean you don't have to do it. HMRC will not magically know that you have a source of untaxed income, you have to tell them.

When there is untaxed income the onus is on the individual to declare it by doing a tax return. It might not be necessary if income is small and below personal allowance.

jacknscoob

Thanks everyone for all of your help.

Just on another issue whilst I am on here. My UK passport needs renewing.

Does it matter where I live? I have both UK and Oz addresses.

Thanks in advance.

louie

AIUI the thinking is that if you are UK resident, it should be easy enough for HMRC to track you down and make you pay your taxes if you forget to advise them about your income, whereas if you are overseas it's more difficult, so unless either there would be no tax or you have already proved to be trustworthy, they get the tax up front and it's up to the non-resident to claim some or all of it back.

Jilliebee

As you are currently residing in UK, then use that address x

Alan Collett

If you are resident in the UK the capital gain is to be computed under UK tax law.

You will need to consider the gain over the total period of ownership, deduct the amount attributable to CGT exempt periods, and factor in lettings relief.

=> Probably best to discuss with a tax accountant.

Consider also whether you have in fact severed your tax residency in Australia.

Best regards.