wickrama

I am a British citizen who have been out of UK since Jan 2004.
I am thinking of selling my house which I used as the principal reidence before I left UK. I wanted to know if I would be liable to pay any CGT taxes for this in the UK?

I was told by a lawyer that if you have not been resident in the UK for more than 3 years you are exempt from CGT in UK. Not sure if this is correct.

Any help here will be much appreciated.

Thanks

V

BritishGuy36

You would be exempt anyway, any property that is your principal home and of which no part of the house has been used exclusively for business purposes has no CGT owing.

I looked into this quite extensively as I am selling up and moving to the US shortly.

If you are now a USC or LPR you may be liable to Uncle Sam for CGT though!

BritGuyTN

as far as i'm aware to get the USA exemption you need to live in the property for 3 of the lasst 5 years

so the OP is liable for 15% capital gains to uncle sam

Michael

That may be true if he doesn't sell it in 2 years, had previously owned it for the previous 3 year, and has capital gains on the sale. But wouldn't he also claim any rent as income but also deduct any expenses such as interest paid, depreciation (approx. 3% of original cost annually), and possibly even any trips back to the UK to inspect the property (1040 Schedule E)? Since it sounds like he has a large mortgage, he may not get enough rent to cover the mortgage payment causing an income tax deduction on his US taxes. Even if he did make some money from the rent minus interest payments, depreciation should make sure that he gets a tax deduction.

BritGuyTN

rent not covering mortgage can be a deduction - if you make a loss and your income is low enough...

Michael

A deduction shouldn't have anything to do with whether your income is high or low. This should be considered a business investment with the following restriction.

Renting out real estate property is generally considered a passive activity, even if you devote a substantial amount of time to selecting the right tenants, repairing the rental unit, and inspecting the property for routine maintenance. What this means is that the IRS limits your losses from your rental business to a maximum of $25,000 per year. This is $25,000 in total losses from all your rental properties.

BritGuyTN

http://www.real-estate-owner.com/MAGI.html

make more than 150k and you get no deduction for a loss

farmerwife

It looks as though Wickirama is asking the question in reference to his British CGT, not USA CGT. As far as British CGT is concerned, I don't think it would apply to Wickirama, as his British expert advised him, due to the time elapsed and not being in that jurisdiction.
However, for Uncle Sam here in the USA, if the property has been rented out since Jan 2004 that could put the property into USA CGT territoritory, as that would be 4 years and 6 months out of the last 5 not being a principle residence for Wickirama.

wickrama

Dear All,

Thank you for all your inputs and advise on this.
Yes my question was in reference to UK CGT liability.
So I think the consensus is that once you are out of the UK for 'x' number of years then you are no longer liable for CGT.

Thank you once again.

Wickrama

qwerty007

I recently paid CGT in the US on UK property. My CPA had informed not to worry because it was only 15%. However, that is just the federal splice. There is state tax to pay, and if the gain is big enough it can put you into the Alternative Minimum Tax bracket, and you'll end up paying about 28% on everything. Seek advice from a CPA in the US. I would think it would be better to sell it before you move to the US.

im9907620

As I understans it, in the UK you get the last three years as main residence whether you have lived there or not. Over that it cant be your main residence if you are not there, but if you buy elsewhere (in the world) you have 2 years to nominate which property is your main residence. In the posters original question, there would be very little or no UK CGT to pay, but it could be subject to US tax unless she was relying on the residence tie-breaker rule to stay within the UK tax regime.

jon06

No CGT payable to UK