Default Property Sale - CGT - Non resident Tax Payer

[Gordon999]

Chloe,

I believe you should seek advice from tax advisors who provide service to the ex-pats. Any advice given in LZ Forum is not reliable and may be wrong ( including mine ) .

If you are currently a UK tax resident and you move overseas , you become a non-resident . But if you return within 5 years of moving overseas to resume residence in UK, you are treated as having been "temporary non-resident " and you may be asking to pay cgt as a normal resident for any sale of assets during the 5 year period. .

The rule for "non-resident" status ( "less than 90 days stay in UK ") was changed around 2013 if there is "employment lasting over 30 days in UK " .

[ChloeRadshaw]

I do not disagree with you that taxes will rise and we can only plan on the basis of tax rules today.

My question has not asked about the future - Rather it seeks clarification for whether the five year temporary non resident rule applies

1) from the date of sale (meaning five years out of UK from sale date)
2) from the date of departure meaning if you have moved outside the UK you can sell at any time after you have left and not pay CGT PROVIDED you are out for five clear years (meaning elapsed time)

[ChloeRadshaw]

Gordon999,

Many thanks - Yes I am quite clear on the non resident temporary resident piece and employment of 30 days or more - I am also certain that I am non resident in UK.


I do not disagree with you that taxes will rise and we can only plan on the basis of tax rules today.

My question has not asked about the future - Rather it seeks clarification for whether the five year temporary non resident rule applies

1) from the date of sale (meaning five years out of UK from sale date)
2) from the date of departure meaning if you have moved outside the UK you can sell at any time after you have left and not pay CGT PROVIDED you are out for five clear years (meaning elapsed time)

[Gordon999]

"Temporary non-resident" status applies to persons who left UK residence to live overseas and returns to UK residence within 5 years from date of leaving the country.

Non-resident ( after one year away from UK ) can sell property and pay cgt based on capital gain calculated from the April 2015 valuation.

"No CGT to pay after 5 clear years" only applies to " capital gains" below £12,300 the personal allowance level ( for capital gains ) .

[ChloeRadshaw]

Hi Gordon

you list me with this last statement “No CGT to pay after 5 clear years" only applies to " capital gains" below £12,300 the personal allowance level ( for capital gains”

what exactly do you mean?

suppose you are out of the Uk for three years and sell the asset today (with cgt only in the portion from 2015 onwards because we have correctly established that pre 2015 gains are tax free)

then you continue outside the Uk for two years. This makes the total time out of Uk five years but you sold the asset mid way through.

this would lead to no cgt payable (on pre 2015 gains)

[theartfullodger]

re

I do not disagree with you that taxes will rise and we can only plan on the basis of tax rules today....

Nope, you can plan on the basis that tax rules get more painful (or indeed any other assumption).

Planning only worth doing on the basis of realistic assumptions. And we're ALL going to have to pay for Covid & Bre**** (well, England at least). Any decent patriot will pay they share.

Best wishes to all

[Gordon999]

If you are already non-resident for more than one year , you can make the property transfer now as a non-resident and pay the cgt calculated from the 2015 valuation.

If you take up residence in UK within 5 years from date of moving overseas, you may be asked to pay the full cgt . I don't understand why you want to return to UK because taxation may be higher in 2-3 years to pay for covid.

[James256]

Hi Chloe

I see that your question focuses on the five year temporary non residence rule. This doesn't really seem relevant here. Capital gains tax applies on disposals of UK property sales whether or not the individual is UK resident (https://taxresidenceguide.co.uk/capi...tax-residents/ ) and the term 'disposal' includes such things as transferring a property into a SPV (i.e. a company). So transferring it into a company would be just the same as if you sold it to someone for it's market value: you would be deemed to be disposing it for it's market value, even though you are obviously not receiving any money for it, since it's your SPV/company. Unlike a trading business there’s no sort of incorporation relief, and this has been tested at First Tier Tribunal (Ramsay vs HMRC, 2012)

[Gordon999]

J256,

I found in your example Ramsey v. Hmrc, there was an appeal against the FTT decision which was successful. So Mrs Ramsey was found to be operating a business. I don't think Chloe wants to have her BTL property treated as operating a business in UK.

[julischevalier]

As a new member in a very similar situation I would love to know whether the five year temporary non resident rule is five FULL CALENDAR years or five full tax years

Suppose someone moves abroad and has a full time work contract in Germany starting on 6 April 2020. Further suppose that this person returns on 7 April 2025 making five full calendar years but only three complete tax years. The person is clearly non resident and meets the statutory resident test for being non resident but it remains unclear if they would pay CGT on a property disposal that occured (which they owned before they left) in the year they return.

[Gordon999]

The tax rules could change before 2025 because the Chancellor has urgent need to raise tax revenue to cover Covid -19 epidemic costs and an estimated £300 Bil deficit. You should expect capital gains tax rates to be higher in future.

If your capital gain is low say £20K , you would not mind returning after 5 calendar years. But if your capital gain is large, say £500K, you would not return before 5 full tax years have passed.

[Neelix]

Thank you Gordon very grateful

however This is not correct. The property was valued in 2015 at 500k. There has been no increase in gain since 2015 which means that the entire amount of 260k is available at no tax to pay.

Why don’t you think the value hasn’t gone up in 6 years ? Seems a very odd claim given how much home prices have risen