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About to sell UK home

About to sell UK home

Old Jan 27th 2016, 5:05 pm
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Default About to sell UK home

Hi all,
These forums have been pretty amazing for me during my UK - US move.

I moved to the US from the UK in Sept 2013.
For the 2013 tax year I had tax prepared by Deloitte, as my company was covering it.

For 2014 (became a US tax resident) I toyed with turbotax but ended up using a CPA, who actually got some (depreciation) stuff wrong.

I am not sure yet what to use for 2015, as now (2016) i want to sell my home and would probably need to some tax advice/planning from someone who is more of an expert. I am open for recommendations, but I would prefer not to pay thousands in fees :P

Some details:
I bought my flat for 320k GBP in April 2011. Planning on selling around March/April 2016 for around 600k.

1. There is a pretty big gain on this (thanks to London property prices), but am I right in thinking that I can get the 250k USD allowance?
- I lived in the flat from April 2011 to Sept 2013 so I should qualify for the 2/5 years test.
- I am married but my wife never lived there so I doubt I can get the 500k allowance
- The flat has been rented out since Oct 2011.

2. From reading up in the forums, besides the capital gain, I will be liable for tax on income from the currency gain on my mortgage.
- I got a 256k GBP mortgage in April 2011
- By now the amount is reduced to 220k through monthly interest+capital repayments

How can the Forex gain be calculated? Everything I see online is for interest only mortgages. How are capital repayments factored in?

In addition, what Forex rates can I use in calculations? I have been using the 2011 mid rate (for depreciation purposes), but some have stated that the rate on the exact day of the mortgage is needed (which is very unfavourable)


I would love to hear everyone's thoughts
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Old Jan 27th 2016, 5:18 pm
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Default Re: About to sell UK home

For tax purposes where it is single transactions the rate on the day of purchase and the day of sale are what is used. As long as the rate comes from an acknowledged source the IRS isn't concerned where the information comes from. XE Currency Tables
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Old Jan 27th 2016, 6:42 pm
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Default Re: About to sell UK home

You definitely need some good tax advice, not least around the $250k v $500k cgt allowance on your home, and whether you can get the $500k, because I certainly wouldn't discount the possibility until you have heard from a tax expert.
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Old Jan 27th 2016, 8:07 pm
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Default Re: About to sell UK home

Thanks. Any recommended Tax accountant/advisors i could use?

A separate question regarding the forex gain. If i remortgaged (paid a fee to change the rate on the remaining balance, with new contract term) in Aug 2013 would the new amount and exchange rate be used for the mortgage calculation of gain?
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Old Jan 27th 2016, 8:13 pm
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Default Re: About to sell UK home

As Pulaski said. However, I caution to strongly consider keeping the property. I still regret a sale I made 20 years ago (and I profited well then) but London prices will always be. No one knows the future but solid investment property like that is gold. Of course, you may have already considered that but just my 2 penneth. Wish you well whatever you decide.

Oh and at the time I thought my reasoning was perfectly sound. I thought I would not be moving back and my US side of the family kept saying why keep it !
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Old Jan 27th 2016, 8:24 pm
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Default Re: About to sell UK home

I am going back and forth about it, but I decided its the right thing to do. I got married here so i'll be looking to buy a place here relatively soon.
The capital gains i would save are considerable (especially in the short term) and probably UK taxes will be minimal too.

As for longer term, then yes its perfect if I keep it, but its not easy in NYC to keep on renting and saving for the future.
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Old Jan 27th 2016, 8:40 pm
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Default Re: About to sell UK home

Originally Posted by vikingsail View Post
As Pulaski said. However, I caution to strongly consider keeping the property. .....
On the contrary, the cgt position has changed in the last 20 years and any gain you stand to make on it now would be subject to horrific cgt, and after as little as 18 months.
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Old Jan 27th 2016, 9:29 pm
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Default Re: About to sell UK home

As a side note, what are my UK CGT obligations? This was my main residence before I had to move for work.
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Old Jan 27th 2016, 9:46 pm
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Default Re: About to sell UK home

Originally Posted by jimakos View Post
As a side note, what are my UK CGT obligations? This was my main residence before I had to move for work.
If it was your primary home for substantially the entire period you owned it: nothing, zip, zilch!
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Old Jan 27th 2016, 9:52 pm
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Default Re: About to sell UK home

Yes it was my primary (and only) home from April 2011 to Oct 2013.
After that it was rented to family and I've been renting in the US.

How does HMRC view that? I still have no UK CGT obligations? What about these new expat rules from April 2015?
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Old Jan 27th 2016, 9:59 pm
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Default Re: About to sell UK home

Originally Posted by jimakos View Post
Yes it was my primary (and only) home from April 2011 to Oct 2013.
After that it was rented to family and I've been renting in the US.

How does HMRC view that? I still have no UK CGT obligations? What about these new expat rules from April 2015?
Were you sent overseas by your employer? If so I think you'll still be OK.

Separately, you get the "last two years" (24 months) free of CGT anyway, so if I am wrong about the time working overseas, you could have a few months of the gain prorated (the gain is deemed to have accrued on a linear basis between the dates of purchase and sale.

Honestly, I don't know how the new expat rules work.
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Old Jan 27th 2016, 10:02 pm
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Default Re: About to sell UK home

Yes I was transferred by my employer.
Is there any official HMRC documentation about any of this?
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Old Jan 27th 2016, 10:05 pm
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Default Re: About to sell UK home

Originally Posted by jimakos View Post
Yes I was transferred by my employer.
Is there any official HMRC documentation about any of this?
Plenty. You can start here.

Click through a couple of links from the one I posted above and you get to this bit:
Tax relief

In most cases you won’t have to pay tax if you sell your home before 6 October 2016. You must have lived in it as your only or main home at some time before 5 April 2015.

This is because:

you get a tax relief called Private Residence Relief for the last 18 months you own your homenon-residents only pay tax on any gain made since 5 April 2015. .....
So in your case, your property was either your home, or you were overseas, or it was the last 18 months of ownership (and you had previously lived in it), therefore assuming you sell before October 2016, no CGT will be due.

Last edited by Pulaski; Jan 27th 2016 at 10:14 pm.
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Old Jan 27th 2016, 10:19 pm
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Default Re: About to sell UK home

Ye just got to that too!
Thats pretty good, which actually matches up to the US CGT relief period for me (2 out of 5 years).

Now if I can find a good accountant to manage my US obligations (and if i get 500k relief that would be ideal, but not banking on it).

As others mentioned in the forum, some highly rated expat tax accountants haven't really been replying
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Old Jan 28th 2016, 7:25 pm
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Default Re: About to sell UK home

Does anyone have any other advice regarding the Forex Gain on the Loan?
I still need to figure out how its calculated, (how to factor in capital repayments) and how it is reported.

I inquired with my CPA who prepared my last year's Taxes and not only he had no idea, he called it absurd and not the case.

Part of me thinks figuring out the right calculations, it would be easier just to use Turbo Tax

Last edited by jimakos; Jan 28th 2016 at 7:30 pm.
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