tony3030

okay here goes (i`m sure this has come up before but i can`t find the right answer)

we now live in sydney, got here in oct07 on a 457 and we rent at the mo. now, we also have a house which we rent in the uk, since we left. in oct09 we get pr. so our tenant in the uk is moving out so we have looked at the possibility of selling due to the nightmare of renting!! what i need to know is basically what are the tax pros and cons . for example if i sell now do i have to pay capital gains in the uk, does getting pr in oct09 change this do i have any tax obligations in oz, if after getting pr we buy a house in oz and keep the uk one what happens then?? also we have no plans to go back to the uk - dont know if that has any bearing....

i have trawled the hmrc site and got nothing just vague, if this/if thats, no defo`s.

any advice would be great guys thanks in advance

Tony the pilot

Hi Tony..If you are considering selling your rental property and assuming you have a partner, put the property in joint names and capitalise on your CGT personal allowances, which are about 10k a piece=20k. If you were PR in oz you will take the valuation at that time and any gain thereafter will be distributed through the to countries joint tax treaty.

Purchase price £80,000
For Example property value on departure £100,000
Total gain up to leaving the UK £20,0000
P/Allowances assuming x2 £20,000=Nothing to Alistair Darling
Property value now £120,000
You have made a gain of £20,000 since leaving, so tax may be due to the ozzy government..It would be worth checking the CGT rules in Oz.

If you do sell your property, make sure any items that have capitalised into your balance sheet, i.e. new central heating, new roof and so are in the final account, this will reduce your tax liability further in the uk

Just one other thing if you carry on renting your property, ensure you get a non resident exemption code or you will get chaffed for tax at source, whether using an agent or not..you may have got lucky to press...

Hope that helps...

Bermudashorts

If you lived in the property the whole time you owned it in the UK i.e. it was your primary residence and have only rented it out since Oct 2007, you will not be liable to UK capital gains tax. After three years, then any gain would become partially liable to CGT in the UK.

Tony the pilot

Are you referring to taper relief, I thought that since the CGT regs changed, that had gone out of the window...Let me know.

Bermudashorts

No I am referring to the specific CGT rules around selling your property.

http://www.hmrc.gov.uk/cgt/property/basics.htm

Scroll down to the section headed "Selling your own home" and it confirms that you can ignore the last three years that you owned the property. Which is what I meant when I suggested that the last three years are effectively treated as if you lived there.

Tony the pilot

Something free from the HMRC, well I'll go to my back gate..Cheers

louie

In any case, there's no CGT payable in the UK after the end of the tax year in which you cease to be resident, unless you return within five or so years.

Can't help re the Oz tax, sorry.

Prudi

CGT is giving me such a headache, and the more I read, the more confused I get!

I`m trying to work out if I will have to pay it if my house sells after I have moved to Oz.

HMRC Help Sheet 278, Example 4 (Help Sheets are here) seems to suggest yes, or have I misread it? You guys here seem to be saying `no`, or is that because Tony`s been out of the country for longer than a tax year?



Any help appreciated!

Bermudashorts

I only skimmed through it but that particular help sheet only seems to cover "assets", property is a special case when it comes to CGT.

If you have lived in your house as primary residence for all the time you owned it, up until the point you move to Australia and then you sell it soon afterwards, (in fact up to three years afterwards) then you will not be liable for CGT.

Who is making a profit on their house these days anyway?

Tony the pilot

That wasn't my experience with the Revenue..Any gain from the original valuation at the departure date and the property no longer being your primary residence is liable to cgt, less PA.. Anyway as you say who's gaining at the moment anyway..!

Prudi

Hurrah!

Oh no!

Prudi

Seriously guys, thanks for your help. I am a complete numpty when it comes to matters financial.

tony3030

thanks guys things are getting clear. but one last thing.

the way i now understand it if i sell my house before 3 years of leaving the uk i dont pay cgt..... right??

then after that i do .. so the way i read it on the hmrc website, after 5 years of leaving the uk the taxman is not interested??

does that mean that you are only gonna get robbed for tax between 3 and 5 years of leaving the uk?? seems to be a bit contradictory

Bermudashorts

Post #7 discusses CGT and residency. To be honest, I had not been aware of this (but then I am not a tax expert and I am not disputing it either).

Anyway ignoring the residency matter for a moment, it would not be the case that if you did not live in your home for 3 years for whatever reason that after 3 years and 1 day you would suddenly become liable to a whole load of CGT on the gains since you bought the house, it would be pro-rated.

Conclusion is that most people selling their home to move to Australia permanently, do not need to worry about CGT.

See question 7 in the attached

http://www.hmrc.gov.uk/cnr/faqs_capgains.htm

louie

That "Helpsheet" is remarkably unhelpful !!

The guidance notes to this year's tax return are here - http://www.hmrc.gov.uk/worksheets/sa109-notes.pdf. Page RRN27 is a table showing your liability to capital gains tax depending on your residence position. If you have emigrated you will be not resident and not ordinarily resident but you probably won't qualify for split year treatment for CGT purposes (see RRN9).

So unless you return to the UK within five years or so (in which case see page RRN10) there's no CGT payable in the UK regardless of how long you owned your house and how long you lived there as long as you don't sell in the same tax year that you left.