London-England-Lads

Hey All,

Well we have had some great news this weekend, we have had a sale offer on our house (less than we wanted.), alongside a long term rental option (3 years with intention to buy after.)

If we live in the UK - we would not pay tax on our UK property sale as it is our principal property. I wondered how that works if we are renting in Canada when we sell ? If we are renting - does the UK property still count as our main property ... or do we get smashed with tax?

I know Canada has a mutual tax agreement with the UK, but does that apply to property as well.

Anyone had first hand experience or know someone who has dealt with this before?

Thanks in advance.

Tangram

You will get taxed on the gain from when you become tax resident in Canada to the point you sell. I believe the rental income will be taxed as well as worldwide income.

An expert will be along i'm sure to answer your well asked question or you could search for the many previous answers given.

London-England-Lads

As far as rental - I believe we will pay tax on the profits.

Its more to do with the selling I am confused.

Thanks for prompt response.

Rob

Almost Canadian

If you sell the UK property within 3 years of vacating it, you will not be liable for CGT in the UK. From what others have stated on here, if you sell between years 3-5 of vacating it, you will be liable for CGT in the UK. After that, there is no CGT liability in the UK if posts on here are to be believed.

In Canada, you can only have one principal residence so, if you buy in Canada and you nominate your Canadian property as such a residence, you will be liable for any gain made on the sale of your UK property.

JonboyE

This leaflet explains the basis of charging CGT for non-residents. http://www.hmrc.gov.uk/helpsheets/hs278.pdf

Note in particular that:

For a charge to Capital Gains Tax to accrue under Section 10A TCGA 1992 all four of the following conditions must be met:

1) ...
2) ...
3) there are fewer than five complete tax years between the year of departure from and return to the UK. ...
4)

In other words, if there are more than four complete UK tax years since an individuals departure from the UK there is no CGT in the UK.

Almost Canadian

Is the OP intending to only being a temporary resident of Canada?

Almost Canadian

This leaflet provides an overview:GCT on property

I don't know how accurate the law is stated but it seems to suggest that, after not being a tax resident in the UK for 5 years, there is no CGT to pay on any disposal of an asset in the UK.

I have to admit that this surprises me (although it appears that the law regarding CGT has changed a huge amount since I last looked at it, which is not really surprising). Obviously, there are exceptions but they do not appear to be too onerous.

JonboyE

It doesn't seem to matter. Once the taxpayer has been non-resident in the UK for at least four tax years the capital gain realized while they are non-resident is not taxed in the UK.

It used to be just one year. The someone with a large capital gain to realize would move to Spain on March 31 in one year, sell whatever they had to sell on April 7th, spend a year relaxing in Spain with their tax-free proceeds, and arrive back in the UK on April 7th the following year.

Almost Canadian

Thanks

gryphea

When I queried them on it and said ' why would you do that', they explained its because there are double taxation treaties and levying capital gain in UK would mean some of the treaty countries would get a reduced tax income because of it and that was considred unfair, that really the taxes should eb due in country of resisdence. Therefore I got the impression it was part of the negotiation with tax treaty countries.

Almost Canadian

It seems odd. A wealthy person could buy a number of properties in the UK, ride an increase in values and then sell, leaving nothing to the UK and, possibly, pricing the locals out of being able to afford properties. From what I hear, this appears to be Vancouver's problem. If anything, one would assume the local government would wish to tax the living hell out of capital gains made by non residents to ensure the above doesn't happen.

JonboyE

They do, and it still does. There is no exemption for non-residents of Canada. In fact, unless the non-resident has made prior arrangements with the CRA, the buyer must withhold 25% (50% for commercial property) of the purchanse price and remit it directly to the government. The non-resident then has to file a return to the CRA to request a refund of the withholding tax after deducting whatever is due on the capital gain.

London-England-Lads

Thanks for all this - but we sold (STC) on Monday - so hopefully will head to Canada in a better financial position.

Mikeypm

Congrats, just me being nosey but did you get the asking price?

London-England-Lads

2500 under - so happy with it , as we have a small mortgage left.