wellinever

I am in the same position as both of you. I only want to really be in PT from Nov to end April, without returning to UK in between. Own property in both countries. Only have pension income form UK.
HMRC considers UK property as main home.
Which by definition means that the PT house is considered a holiday/second home, and therefore taxable, when sold, in UK under CGT rules as such.
My particular concern is with UK CGT, on the PT property, which will have much more gain than the UK one, which I dont intend selling anyway.
As a PT resident I would be able to reinvest in another MAIN home in the EU, using the standard terms of PT reinvestment, within 36 months of the sale.
But at the moment I would be obliged to inform HMRC, even though I am Fiscal resident in PT with a MAIN home there, of the sale and any capital gain made. You have 30 days to do that. So give the current situation, HMRC would be able to make a claim against the CG as a second home, without any allowances for reinvesting in a main home. Meaning that they would want their money within a short time, and that money would be considerable, reducing the amount available to reinvest.
Hence me trying to get the PT home classed as main home and therefore free of UK CGT under main home ownership basis.
And of course that is the situation, as a resident and living in PT, as a pensioner, with S21 all approved and registered in PT, it would be considered by any normal person as my main home and the UK property would be the second home.....

The reason I mentioned a P85 form was that I have had 2 recent discussions with HMRC direct on this topic, being totally open about the situation in all aspects. Lets face it they take your name and NI number before answering questions....in the first instance I was told that the P85 form was the one to fill in and return. I like looked at that and thought that it does not really appear to apply to me as I haven`t worked for many years and dont have a p45.
So I made contact again and asked again.....this time to be told to fill in form SA109
I have not yet done that.
But its clear that you only have 2 years after purchase of a second home to nominate it as your main home.
So I have asked one final time, why I cannot simply send a letter to HMRC nominating the PT house as primary main home, and to remain UK tax resident, as well as PT tax resident.....no answer yet..
If it is that simple I will report it, but it would beggar belief why one the most prestigious firm of Int. Accountants would quote me £5-£7K to give their opinion, if such a simple matter of fact..

GrahamF

Considering reapplying at my registered address rather than getting the run around and delays at Faro again, the medical should still be valid. In the meantime I'll continue to plead tourist, after all I do spend more time in the UK. Just remembered, I still have a South African HGV and residence card (says I'm a white person) dated 1969 or '70, wonder what would happen if I presented those to plod?

appman999

Wellinever, my amateur understanding is;
1. You are obliged to declare gains on UK residential property sold within 60 days of selling the property if the completion date was on or after 27 October 2021.
This does not apply to any other capital gains (inc foreign property) which are declared through your normal tax return and you will get the £12,300 tax free allowance
2. I see why you want to transfer main home from UK to Portugal and the link I gave you allows that. I'm still not sure why HMRC letting AT know this is a problem.
3. The P85 appears to be for leaving the UK which you haven't and for claiming tax relief or a repayment of tax which you don't appear to be doing.
4. The Sa109 appears to be for those who have non standard residence/domicile. But I would guess you are a standard UK tax resident by dint of the SRT and Double Taxation Convention.

wellinever

The only reason I have not `left` the UK is because I have a property there and how the tax man views it with SRT,
So you see the dilemma, and the reason for getting the PT house the main home. When I say only spend 6 months in PT, that could easily be made 9 months as it s only really the 3 mid summer months that I dont like. But its the SRT that I find unnecessary, hence trying to make things easier by simply nominating PT home as main residence, then am I right in thinking that it would not need declaring at all in UK.
I also wonder if as a PT resident, selling a PT main home, and reinvesting within 36 months, that PT AT would tell the UK at all....one UK accountant suggested that I would simply leave things as they are, he did not see any reason that PT would inform UK, and if a problem in the future, that I would be able to prove, by way of expenditures and flights that I spent less than 90 days in UK and therefore PT is in fact my main home !!!

appman999

Why not leave then?
Sell your UK house (no tax to pay as it is your main home), leave UK and don't spend more than 16 days there in the current tax year.

You will then be non resident in the UK but have to pay Portuguese tax on your UK income.

wellinever

Well that is the biggest issue for me............I could not stay in PT in June July August way too hot and busy, problem for me being in Algarve.
The prop I have in UK , is perfect for me for the 3 months of summer, quiet town, and I am in the centre, stones throw from everything, so on my ultimate full time return to UK, I have a place, ready and thats perfect for an old timer, which I know well.
So its a personal thing, as so many things are, we all have slightly difference lifestyles and likes and dislikes.
So this is planning ahead, but trying not to give too much away, if it can be legally avoided.
If I was 20 years younger I would, but things change.
If I was spending more than 183 days in UK a year, and could handle 90 days at a time over winter, then I would not have become resident

appman999

We are in virtually the same position (once we get our residency) although our concern over Portuguese CGT is smaller as our UK home would have the bigger bill (but is our main home anyway so no tax).

When we buy our new home in Portugal the amount of growth in our remaining years is not likely to cause a big bill (especially with the high costs involved)

Given we are of an age there is no chance we will be moving house again in Portugal, again especially with the high costs involved, so the CGT benefits are only on 50% (assuming we sell before we die)

So the gain on our Portugal house would have to be twice that of UK house plus £10,000 tax allowance to balance CGT. That is never going to happen for us.

All I need to get is confirmation of my thought that I will remain tax resident in the UK despite spending more than 183 days in Portugal and so will only pay Portuguese tax on Portuguese income.

I'll let you know if I do.

wellinever

Nothing to do with immediate CGT issues but to the best of my knowledge, once you become resident in PT you must declare yourself Tax resident in PT (60 days to do that in), and then file a tax return in PT each following April, on income between Jan -Dec of the previous year.
If that were not the case I would not have declared myself tax resident, but would have lost the opportunity to reinvest as a main home (its the tax office where you declare property ownership as resident or non resident) .
I dont see how you can be a PT resident and not Tax resident?? Thats not to say that you cant be tax resident in both.
And if not a tax resident when and if you come to sell said Property in PT how would you take advantage of 50% reduction of CG, because you have to declare any other worldwide income, which is added to the Capital Gain and then you pay on 50% of that figure at nominal rates......but still might be less than the 28% a non resident pays
However it would not surprise me if SEF and AT do not communicate between each other.......
But of course technically, in order to have/keep residency status you should be in PT for at least 183 days a year.

One of the reasons I am so cautious with all of this is that I was a PT resident and tax resident from 2005 until I sold a previous property in PT back in 2009. At that time I did not have a property in UK and had not been in UK for 5 years, I made a reinvestment in UK (as you could then) and paid CGT n PT, nothing due in UK.
However when I returned to PT in 2016 and bought some land on going to the Financas to register the land with my UK address, was told that I was Tax resident in PT, and had been since 2005!!!!
SO despite not having had a property in PT, yes visited PT over winter as UK resident (temp residency would expire automatically as not reapplied, in 2010). My accounatant at the time was given all info to prove my UK reinvestment and assured me that all taxes were paid and I was free of PT AT ! ..Not so. SO despite having all the evidence that I had left PT in 2009 the tax man still considered me as tax resident,and therefore my intention of taking out NHR in 2016 was scuppered.....oddly however I was never fined for not filing a tax return in PT. for that period...........so I really dont know what goes on, am thinking of trying to apply for NHR before the end of this March, as long as it doesnt open a can of worms.

appman999

I understand your caution after your previous experiences but I can only repeat the following.
1. You can be tax resident in 2 countries at once. The SRT gives me UK tax residence with two ties and more than 3 month stay and once resident in Portugal, more than 183 days a year gives me Portugal tax residence.
2. In the case of Portugal/UK there is a Double Taxation Convention which defines your status if you are tax resident in both countries and everything else being equal under Article 4.2.c your nationality decides it.
There is no doubt in my mind therefore that I will still be UK tax resident after becoming resident in Portugal but you then have to read the various clauses of the Double Taxation Convention to see the result.
After this I get less sure but Article 13 which covers Capital Gains says that gains from the selling of property are taxed in the country the property is in.
Even less certainly you would only do a Portuguese tax return for any income/gains which arise in Portugal, not worldwide income, and this ties in with what GrahamF said earlier.

wellinever

Morning
I am not doubting that you are correct in what is being said, its the implication of that that I am finding difficult to appreciate, and how it might affect what I might do
Of course I have no idea what HMRC does to challenge anything that people say about how long they are in the UK in these circumstances, but would guess that providing tax is paid as they would expect then the answer is nothing.

But what you are saying is that ultimately you would be a resident/Tax resident of PT and therefore be able to remain in PT for unlimited time each year. And under SRT would also be a resident of UK.
You would be taxed on income in UK, and would File a PT tax return but claim tax already paid in UK against the PT Tax due, and pay any shortfall to PT AT?
If that is what you expect I appreciate that as the existing situation with Double Taxation.

But for example, if you decided to sell the UK property, as a Tax resident and SRT, it would be considered by UK as main home would be free of CGT.
However the gain would also be subject to PT tax, and as they would consider it as a second home (They consider your PT home as your main home) it would be taxed in PT after being added to worldwide income (50% of gain I suppose would be allowed)
Similarly if the PT property is sold, PT would tax the gain as a main home, but the gain would also be subject to UK CGT as a second home and therefore some tax would be likely, but no allowance for reinvestment anywhere.
Would you exchange your UK DL, as a resident of PT you cannot drive on a foreign license, which must be applied for within 60 days (normally).

appman999

I'm not convinced about my implication either! We are in similar situations and trying to find the answer without forking out hundreds for dubious advice. Your situation is complicated by the need to have your PT home as Main Home,
Yes but my hypothesis is that I would only need to do a PT tax return for PT income/gain, which in my case is nothing (until selling my new house)
As above my hypothesis is that I would only need to do a PT tax return for PT income/gain, but I guess that also means I will not be able to take advantage of the PT CGT 50% discount?
Yes, UK will tax as second home but I'm assuming that I will need to pay full tax in Portugal and then declare this against UK liability.
Yes

appman999

Consider the situation in reverse (i.e a Portuguese national splitting their time between UK and Portugal like us but effectively tax resident in Portugal)

They would be taxed on their worldwide income in Portugal.

HMRC say they would need to do a tax return in UK as well but claim relief for tax paid in Portugal.

This seems to shoot down my hypothesis!

Apologies.