My client’s tax question is – I am tax resident abroad and considering the sale of a property in the UK that was previously my main residence. Will I be liable to pay capital gains tax in the UK?
Since 6th April 2015 disposals of residential property situated in the UK are within the scope of charge here.
The capital gain arising can be calculated in one of two different ways. Either the conventional method of consideration received less original base cost, or consideration received less the market value as at 6th April 2015, when the statute changed. For most individuals the market value route will be most beneficial but if that route is chosen then some reliefs are affected, in particular, the principal private residence exemption. The usual relief is determined by a fraction of the qualifying period (actual occupation + final 18 months if appropriate) over the entire period of ownership, when adopting the market value option, both the period of ownership and the qualifying period are deemed to begin on 6th April 2015. Thus, when deciding which calculation to use both methods need to be considered as the movement of the proportionate relief can also affect the result.
It is mandatory for the disposal to be reported on line to HMRC within 30 days of the conveyance if penalties are to be avoided. The penalties are imposed regardless of the ultimate consequence, ie whether the end result is a loss, a gain or a chargeable gain and begin at £100 for an initial lateness with further penalties for exceeding six month and 12 month deadlines. Interest and late payment penalties can also be added. Payment should be made within the same 30 deadline unless the individual is already within the Self-Assessment regime when payment can be made on the normal due date.
The gain may also be subject to charge in the client’s country of residence but depending on the terms of any Double Tax agreement, a foreign tax credit may be available in respect of any UK tax paid. HMRC are currently aggressive with the penalty charge and as clients have a tendency to advise transactions only after the tax year end, it would be wise to make them aware of their obligations before any infraction of the legislation occurs.
Elaine Wood – Vantage Tax Advisor
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