wellinever

Does anyone have experience of what happens when a Tax and normal resident of Portugal, but with a property in UK that is available to live in (ie not rented out) sells the Portuguese property, on which there is a capital gain with tax to pay, but who opts to make a reinvestment in Portugal within 36 months of sale.

In this case, as I see it the sale details with capital gain amount must be declared in the UK.

Given that the UK would want capital gain tax to be paid immediately, but on all of the gain, unless it was considered the main home.
Does residency (in this case Portugal) mean that the Portuguese house would be the `Principle property`(by virtue of rules of residency) and therefore exempt of capital gain in the UK. (as it would also have to be in Portugal to gain reinvestment relief)

Otherwise if tax was paid in the UK in year one after sale, reinvestment relief would be pointless in Portugal as more tax would have been paid in the UK.

Does this become a question of proof of living in a property, rather than it being simply available to live in? ie juggling when in and out of the UK
Talked with a UK accountant who is baffled hence post.
Just to get me on the right thinking lines.

dingg

https://www.gov.uk/tax-sell-property...rseas-property


But see a decent accountant, as it should be an easy question for any decent accountant to answer.

wellinever

Yes sure, easier said than done, both in Portugal and UK......they all have one thing in common.they know how to charge for `advice`, but accuracy of advice not so good. (IME).

borisface

Not sure on what basis HMRC would have any claim to tax your Portuguese property if you are tax resident in Portugal. Being tax resident in Portugal means that all taxes are payable here except in 'special' cases such as land and property held in the UK, or some pensions from the UK. Why do you think you should be paying CGT in the UK?

riv

True, but what makes you think people on here will have more reliable advice to proffer ?

I little knowledge of taxation rules but in principle...........if you are normally and actually Resident in Portugal, plus you are Tax registered in Portugal, and the property in question ( being sold ) is like you located in Portugal - why should its sale be a matter for the UK tax authorities - whether for them to impose a tax liability or to allow for CGT relief ( eg if you made a loss on the sale which you wished to offset against a gain on a property sale in the UK ) ?

I don't see how or why the UK tax people come into it. It would be different if you were making a gain on a sale of property in the UK - where I can see that the UK tax woman would still have jurisdiction in respect of taxing the gain. Or if you were tax resident in the UK, ditto. .

Happy to be corrected , of course, but a link to chapter and verse would be of interest.

wellinever

here is the wording from HMRC
You can see from this that if you sell a property overseas, say in July and go back to the UK , until January next year, you would have been in the UK for 183 days.
(I was given tax residency of Portugal on 1st July and they told me then that I will be liable to tax for the whole of the year, from income in UK) ....No split year allowance.....Whether you’re UK resident usually depends on how many days you spend in the UK in the tax year (6 April to 5 April the following year).

You’re automatically resident if either:

• you spent 183 or more days in the UK in the tax year
• your only home was in the UK - you must have owned, rented or lived in it for at least 91 days in total - and you spent at least 30 days there in the tax year

You’re automatically non-resident if either:

• you spent fewer than 16 days in the UK (or 46 days if you have not been classed as UK resident for the 3 previous tax years)

riv

Well you didn't say originally that there was a complication in that you are spending X days or whatever it is in the UK . You stated that you were tax resident in Portugal without more.

IF you are spending enough days in the Uk to be potentially tax resident in UK as well as in Portugal ( though of course there is the double taxation treaty to deal with that situation ) then why not write to your local taxwoman in the UK and set out the factual position in terms of the date on which you became tax registered in Portugal, plus the dates between which you nevertheless spent in the UK, plus what properties you own in each country, etc., and just ASK the question as to whether these circumstances make you liable to taxation in the UK in respect of the property to be sold in Portugal ?

And if so whether the double taxation treaty comes into effect to relieve you from taxation in both countries. Esp. given your intention to purchase a new property in Portugal with the proceeds of sale.

Not only will you get accurate ( and free ) advice from your local tax office, even if it takes a long while to arrive, but you will have proof that you are seeking to do the right thing in respect of both tax jurisdictions.

borisface

Need more info. When did you tell HMRC you'd left UK? When did you sell Portugal property? When did you go back to the UK? When did you occupy the UK property? It is possible to be dual resident, particularly with how UK residency status now applies, and pay tax in two jurisdictions so this maybe your scenario, however, you won't pay tax twice due to double tax treaties. But your best bet is to go to a sensible accountant who specialises in expat tax. It shouldn't be too difficult. It's quite a straightforward scenario you're just making it more complicated than it is.

wellinever

The complication is maybe my life style, rather than knowing what I am doing every week for the next decade, I have no idea what I will decide to do tomorrow.......that in itself is the complication, ie not fitting in to a nice little box....
No the property has not yet been sold, (but I have a buyer hanging on with no promessa), I have not told the inland revenue that I am now tax resident in Portugal, (do I have to??) My only income in UK is State Pension, not tax, no tax filing. Not needed in UK.
I was in Portugal from Sept 2020 until June 2021.......will go back to Portugal, probably in Sept/Oct....covid dependant.
But that means the house could be sold in November and then I would have to return to UK if I dont find another property in Portugal, or for example if I decide to buy a plot and build another house....thats where the problem can exist, as the UK could demand tax before Portugal, and as the UK would see the Portuguese house as a second home the tax would be higher than the Portuguese tax to be paid in the future, and impact any finances for the next build (equally if I decide to buy another property that is the same cost as the house I sell)........so how would I get that back from the UK.
I did have a property to buy in mind when I was actively selling the house, but by time I had a `good cash` buyer the property had gone.
Yes I suppose I can ask HMRC but doubt if they have the answer as we are talking about about the future not the past.
Sensible knowledgeable accountants are in my experience very difficult to find, I have been given the wrong info so many times by so called sensible firms of accountants.
Hence just asking on here if anyone had any experience.

borisface

I worked for most of my working life as either a senior tax inspector with HMRC and then more latterly as a tax consultant with a medium sized firm, as you're beginning to realise tax can sometimes depend on fairly minute differences in what has happened and so tax planning is really vital. As is being really clear on what has happened/what you plan to do with dates etc. However, my knowledge is a bit our of date by now but from you've said you may be dual resident for tax purposes in both UK and Portugal. So will need to make returns in both countries. However, with respect to the UK, you may be able to make an election to have your Portuguese property treated as your principal private residence for the period you lived there and so not pay CGT for the time that it has been your PPR. But my strong advice would be to take UK tax advice from a chartered taxation advisor rather than just an accountant.

DaveLovesDee

There's also this on the Gov.uklink posted earlier.

TonyJ1

Whoever gave you the advice that you are considered resident for the whole year has not read the tax code 16 - 3
3 - As pessoas que preencham as condições previstas nas alíneas a) ou b) do n.º 1 tornam-se residentes desde o primeiro dia do período de permanência em território português, salvo quando tenham aí sido residentes em qualquer dia do ano anterior, caso em que se consideram residentes neste território desde o primeiro dia do ano em que se verifique qualquer uma das condições previstas no n.º 1.

wellinever

Well Tony, the accountants I am using in Portugal told me that they have spoken directly with AT Lisbon and that is what they have been told by The revenue.
I was under the impression that there was a split year, but please remember that I became actual resident on 23rd Dec 2020. But again was told by a different accountants (in fact 2)
to apply for tax residency in Portugal as soon as I could in 2021, and get a start date of tax residency on the date of my application for that,which I did in March, only to be told by the Financas officer that I could only start Tax residency on the 23rd December (but then said that I could reapply after I received the Final Residents Biometric card later this year !!
Well I have not got the new bio card, but my tax start date is now 1st July 2021.
That about all I know and how much of that is correct I have no idea.
Of course it gets better, because I built the house I own in Portugal and it was completed at end of last year, by issuance of HL. It then took 3 months to sort out the registation and PVT and subsequent the IMI........so I asked for exemption for 3 years, this was refused as I was not tax resident..........and now after having become tax resident for which I will be paying tax for whole of 2021, I am still refused exemption of IMI on the grounds that I started this as a non resident..........can it get better???

TonyJ1

There is a lot of issues here. As you stated, you weren't a tax resident therefore not entitled to the property tax exemption granted to main home.
You have the option of paying income tax for the whole year, or as from the date that you become tax resident as per my previous posting - I quoted the law, and this is applied in practice.
Must remember that civil registry (bio card) and tax registration are two different bureaucracies - look it as UK border control and HMRC - different bodies

wellinever

Hello tony.
With your knowledge of the of for example the exemption of IMI, I have been old that I will NEVER be granted an exemption. For my mind this sounds like robbery, as from 1st July I am now considered a tax resident and therefore entitled to it, even if only for the second and third years. What do you think?.