keeping property in UK
 

We are looking more and more likely to come out to canada this year and have a house in the UK. We have had this house for 10 yrs and have alot of equity , some of which we want to take with us by increasing mortagage so that we have a reasonable deposit for house in canada. We want to keep property in UK as we are not necessarily moving permanently and want to retain a UK property. On the other hand we cannot guarentee definately moving back to UK for how ever long you have to to be exempt from capital gains tax. So how does this capital gains work? Can we some how register the value now so we are not liable for existing capital gains under capital gains tax but only future rises should we not reside in the house again? Or do we have to sell to ensure all our existing gain is captial gains tax free and therefore buy up a new property (which we don't want to do for obvious reasons). So in a nutshell I want to avoid paying future capital gains tax on the amount it has gone up by already whilst we have been living in it.

Also we want to rent house out. How is that treated for tax purposes? Where do we pay tax on the income? Is there any way of making the tax payable only after the mortgage - or does that compromise future capital gains should we choose to come back to UK? In other words, in working out the amount of equity we can release compared with likely rental payments and maintenance etc how much tax should we allow for? and do we get any personal allowances for it?

Or can anyone point me towards some professional advice?

Thanks

Gryphea

Re: keeping property in UK
 

You could ask this guy - he deals with multi jurisdiction taxation: http://www.centa.com/expert.html

Re: keeping property in UK
 

Hi there,

If you are a resident of Canada you will need to look at the tax laws in Canada. Canada does impose taxes on foreign property both for rental and selling (capital gains). If you do speak to someone, make certain that they are aware of Canadian tax laws.

Good Luck
JulieW

Re: keeping property in UK
 

I rent my London property for around GBP12,000pa whilst living in Canada, it pays for my mortgage over here.

I pay UK tax on the rental income and declare it on my Canadian income tax forms, I think the term is 'Foreign Tax Credits'. It doesn't affect the Canadian taxes at all.

Re: keeping property in UK
 

Thanks that's useful

Aren't you worried about capital gains at all? Or are you very confident you will go back?

Re: keeping property in UK
 

I think capital gains has a minimum limit to apply, like 280k something? I'd love to have clarification, we have a house we're going to let out in Leeds. :rofl:

Re: keeping property in UK
 

Capital Gains Tax Annual exemption for the UK is GBP 8,800 for 2006/07 tax year. You might be thinking about inheritance tax where the first GBP 285,000 is tax free.

This help sheet should answer your questions about how it will be treated in the UK.

Not sure about Canada - general rule is that any tax payable in Canada on UK income will be offset against tax paid in the UK.

Re: keeping property in UK
 

Well call me stupid . . . . but Capital Gains Tax (CGT) didn't rate too highly on our list of priorities. I've spent half my life travelling around the world and right now Canada is home, who knows where I'll end up and if CGT will be an issue.

The rental from the house has enabled me to do so much over the years and I'm just enjoying my life day to day. I do have a plan though, that my house will continue to generate rental income and help me out in my retirement, I'll think about how my kids can avoid inheritance tax a few years down the line.

Re: keeping property in UK
 

Thanks! I have an accountant so it'll get sorted in March. God he's going to just love me this year.

Re: keeping property in UK
 

IF you do sell whilst outside of the UK (and if certain conditions are met if you return to the UK) the CGT will be a huge deal - all that money going to the UK government :ohmy:

I appreciate it may be way down your list of priorities at the moment :p

Re: keeping property in UK
 

This is what I'm worried about :P We won't be selling the house in England for another year or so (and my husband better be here in Canada with me before that!), which is going to pay for the purchase of a house here. I actually wish I was filing my taxes earlier so I could bother my accountant about it sooner :(

Re: keeping property in UK
 

If you sell within 3 years of leaving the country you will be exempt from having to pay CGT in the UK. You may, however, have to pay tax on any gain made between the date you landed in Canada and the date you sold the property. These taxes will be payable in Canada subject to any exemptions that may apply.

Re: keeping property in UK
 

Not stupid at all, as you made that decsison but for us, we have a whole stack of equity as we've been lucky and the capital gain tax on it amounts to about two whole years of work. We are not going to just give that up without some investigation!!!!

Looks like we may try and sell and buy a smaller cheaper property and then we have only future capital gain to worry about and not the 10 yrs we have built up

Gryphea

Re: keeping property in UK
 

Just to say that I agree with almost canadian , you have three free years to sell before gains is due in UK, but you should investigate the canadain situation. If it is as Almost canadian says then you should get a valutaion done now?

We are leeds commutor belt

Gryphea

Re: keeping property in UK
 

It should keep for the next month while I wait for my T4s to finish showing up(hubby hasn't gotten a PPR yet, blah). Nice thing about the fellow who does my taxes, he gives me consulting services for free when I file.