'fair market value' of previous primary residence
 

OK

Looks like we will rent our UK house out and may sell whilst in Canada. I had previously read up on capital gains and had got it all wrong. Have just been on the phone to revenue canada and we need to obtain a fair market value for our UK house.

I am planning on providing estate agents letters on price to market, and maybe an offer letter.

Are these accepted? The guy said it would be , I just wanted to check whether anyone else had successfully done this and obtained, from revenue canada, what they believed to be a fair market value- or do they just believe you without question/quibble?

Gryph

Re: 'fair market value' of previous primary residence
 

Aren't some UK estate agents also valuers? I would imagine that such a person, if given the promise of an instruction in the not too distant future, might be amenable to providing a grossly exaggerated current "fair" valuation. If you were to later sell, the capital gain might be quite small, possibly even negative. I'm not suggesting this, of course, just speculating.

Re: 'fair market value' of previous primary residence
 

Ahh speculation, I have been doing the same and have two letters from estate agents suggesting what we market the property at. The average would be an optomistic market value, would CRC accept it do you think?

Re: 'fair market value' of previous primary residence
 

Why would they not, if it looks official? I doubt that the CCRA has a department dedicated to researching UK property prices. In your position, I'd have a chat with the agent. "Look, mate, I'm not selling now but I will in a year. You will get the job. Value it now at what you'll sell for then".

<what's that police car doing in my driveway?>

Re: 'fair market value' of previous primary residence
 

Hi,

Whats this for?
We are leaving in 2 weeks for calgary and as we havn't sold our house are letting it out this week, is there something i need to do??

Roo.

Re: 'fair market value' of previous primary residence
 

Yes

If you plan to sell it whilst you are in Canada you will be liable for capital gains (and you could be for UK capital gains too, if you sell between 3 and 5 years). You need to obtain documentation on the 'fair market value' so that when/if you do sell it you only get charged the gains since you arrived in Canada

Re: 'fair market value' of previous primary residence
 

Oh, Crap!!!

Yet another thing i have to try and fit in before we co...

so will the estate agents valuations do is that the general consensus. (is that the right word)

Re: 'fair market value' of previous primary residence
 

Well I just phoned revenue canada and they said that would be fine. Of course this was just a call centre guy so that's why I asked here to see if anyone had actually submitted and been awarded this as their fair market value. My gut feel is it would be, as like Souvenier says they are hardly going to be experts in the ins and outs of UK property market.

Re: 'fair market value' of previous primary residence
 

and when do we have to give these to them? now or when we sell?

What if we manage to find a buyer in the next 2 weeks (if only) would we still need to mess around then?

Re: 'fair market value' of previous primary residence
 

Well, on their website it says when you change the use from primary to rented you should submit that for the year.

However the call centre guy said the tax return of the year you sell.

Think not if you agreed a sale before you left

Gryph

Re: 'fair market value' of previous primary residence
 

Blimey, good work Gryph. Something I never even thought of! Looks like selling the house after 3 years in Canada is a bad idea - double capital gains! :thumbdown:

What is the rate of Capital Gains tax in Canada?

Cheers
ARH

Re: 'fair market value' of previous primary residence
 

Right in Canada , assuming you have evidence of your fair market value you would only pay capital gains on increases since this. So lets say you currently value house at £100,000 and you have ' fair market value' documents/evidence to say so, then whenever you sell it in Canada you will only pay capital gains on the capital gain since the fair market valuation. So lets say you sell it in 3 years for £130,000 - you are due capital gains on £30,000. It is then rated at 0.5 and then added to your income and taxed as income. If you and your wife jointly own the house , you split the gain. So the £30,000 gets rated down to £15,000 and you each have a capital gain of £7,500 added to your income and taxed accordingly.

In Uk it is worked out differently and is on the ratio of years of non-primary residence over the years of ownership. This is less fair I think and particualrly penalises situations where past gains have been large but where markets slow in the future. The canadian system allows for this but the UK doesn't. BUT UK give you 3 years for free, if its been your main residence at any point I think. After 5 years if you are still abroad- they told me they let you off (but not really sure about this so check it out if its vital) and provided you went abroad to work and came back they back date your non-resident years to resident years (or so they said). I guess the problem arises should you keep your property as rental and relocate somewhere else in UK. So really the idea is don't sell between 3 and 5 otherwise you are hit for UK capital gains. So , if you have been in your house already 5 years and you sell after 4 years in canada your UK capital gain is 1/9 of your total capital gain. Its all a bit confusing but I do beleive I have sussed candian side of it!

Gryph

Re: 'fair market value' of previous primary residence
 

Gryphea, my understanding is that you are not necessarily committed to staying in Canada permanently. I think you said you'd come over on work permits, and see how things go. You may or may not return to the UK.

If you buy a house in Canada and then, at some point, sell up in Canada and move back to the UK, it would be prudent to sell your Canadian house while you're still in Canada. That is, it would serve you to sell your Canadian house while you're still deemed to be a resident of Canada for tax purposes.

The reason is that people who are deemed to be residents of Canada for tax purposes are not charged capital gains tax on their primary residences if those residences appreciate in value during the time that they own them. The minute you become a non-resident of Canada for tax purposes, however, you primary residence in Canada is no longer exempt from capital gains tax.

In fact, if your Canadian house is sold after you've left Canada, the real estate agent will be obliged to withhold 25% of the sale price and remit it to Canada Revenue Agency (CRA). At the end of that tax year, when you submit your income tax return, CRA will settle up their account with you. That is, if the 25% of the sale price that was withheld turns out to have been more than you owe them for capital gains tax, they will reimburse you. Still, it could be unpleasant to wait for that refund. Besides that, it's a tax that you can avoid by timing the sale of your Canadian house judiciously.

Re: 'fair market value' of previous primary residence
 

Yes

We did realise we would have to sell before we left canada, what I didn't realise was that they would withhold money!ekk thanks for that.

Gryph