[Pip]

Hello,

just a quick one. We've left a property in the Uk which is currently being rented out, as we figured we'd do the two year trial thing, and if it works out, sell it and pay off any NZ mortgage and if ,not move back to the UK.

We've decided to buy a house here in the meantime, as opposed to renting for two yrs and are lucky enough to have some capital towards it, so thats all good.

My question is , if we sold the UK house in a couple of yrs - would we have to pay CGT on it in the UK, as its not our primary residence ? (I know - I need to find an accountant!)

Any advice gratefully received

thanks

[veronica]

its your primary residence in the UK isn't it.
what you own outside the UK is taxable in that country and not the UK.

[Moorf]

Be aware of Non-Resident Landlords Tax, if you aren't using an agent then you need to tell the tax office you're a non-resident landlord. A good rental agent will sort it out on your behalf. It doesn't kick in immediately if I remember correctly.... you'd need to check as it was a while ago now...

[speckythecky]

It does depend how long you have owned the house. The same applies to the tax on the rental. If you have had the house only a short time the tax office say that you only bought it to rent / sell on for profit so charge tax.

[jaycee]

As I understand them, UK tax rules only allow one primary residence, wherever it may be.

Moorf did you escape because your gain was within the allowance? The fact that you didn't owe any tax doesn't necessarily mean you weren't liable. I sold a rented flat in the UK (where I had previously lived myself), and didn't pay any tax purely because the figures worked out in my favour after the various allowances and reliefs. Those include any period you used it as your main residence, costs of acquiring/disposing, the infathomable taper relief and your annual allowance.

I thought you have to have been non-resident for four out of seven years before you can avoid CGT completely.

[Moorf]

Non-Res Landlord Info here: http://www.hmrc.gov.uk/cnr/nr_landlords.htm

Govt Financial Info for Brits Abroad: http://www.direct.gov.uk/en/BritonsLivingAbroad/Moneyabroad/index.htm

Previous ENZ thread on the topic: http://www.emigratenz.org/forum/showthread.php?t=3726&highlight=non-resident+landlord

[willsken]

We have 2 rentals in the UK and have been told that as long as we sell them in a tax year when we haven't lived in the UK and don't return within 5 years we won't have to pay any CGT.

[isv]

Despite common belief, even primary residences can be subject to UK CGT if you're not careful - especially if not held for long. If the property is subject to CGT then a charge will arise. So long as you left the UK permanently then after five whole tax years you will be exempt. If you go back before the 5 years is up then the CGT will be accessed on your return. If you are only on a work visa (not PR) then tread very carefully because you are not deemed to have left the UK...those on a work visa are usually deemed temporarily non-resident for tax purposes.

Also has a huge impact on domicile status. Keeping your main house back in the UK is a strong pointer to UK domicility remaining (i.e. it can be claimed that you had not made a clean break... which from what you describe is the case). Shaking off UK domicile status is a lot harder that proving non-resident tax status.

By keeping your main house in the UK technically should you die whilst in NZ your estate will be deemed liable to UK inheritance tax - which is not what you might expect whilst living in a country with no inheritance tax itself. IMO If 'going for good' you should divest yourself of your UK residence(s).

Alan.

[Paul]

Pip
Best thing to do is regardless of non residency and future returns to Uk, none of which you can be 100% sure of (none of us can predict the future!) you should sit down and see if you have a UK CGT problem in the first place.

You need to know when and how much you bought the place for, has it always been rented out or have you lived there as your PPR (main residence) at all, have you improved the property whilst a rental ie capital improvements and finally when you expect to sell it and how much expected sale price could be (allowing for agents fees and legal fees etc)

Once you have all that seek advice from a professional accountant or you could actually try the Inland Revenue themselves and work through the rather complicated taper relief calculations as though you wre still a UK resident. If you have a CGT issue (ie profit is likely to be large) then visit all the non residency angles

Don't forget you get £9200 each (especially important if jointly owned) on the taxable gain before you pay any CGT

Unfortunately tax is a very personal thing and more often than not people will get different answers due to variations in their own personal circumstances

As you say yourself take advice properly and not on here, although hoprfully you can get some pointers at least on here!!

[An Englishman in Scotland]

Hi,
According to my Chartered Accountancy studies here in the UK, you will be liable to Capital Gains Tax for any gains made SINCE YOU LEFT the UK house (this is judged to be the date at which it stopped being your principle residence).
The CGT tax will be reduced, however, by taper relief (it gets complicated!)and the fact that in the year of disposal you will enjoy an exemption (in the current tax year this is £8,800) off of any gains. If a husband and wife co-own the property, that's £8,800 EACH off of the gains.
Bottom line is that if you are to sell it within 2 years of moving to NZ, your capital gains tax liability will be (relatively speaking!) negligible - unless, of course your house is in a 'booming' local market...

[Pip]

Thanks everyone - thats really appreciated. We did actually look into selling it a couple of months ago, as our tenants dropped out at the last minute for family reasons and it was becoming a hassle. Sadly because of the new impact of a local development which has flooded the market with similar properties, the valuations I got from local estate agents were less than we paid for it in Oct 04. (we had lived in it, from then until we left in Feb 07). However, when I got the calculator our, and also remembered our redemption penalty, plus the tax we'd paid to buy it, it became quite a big loss, so we dropped the rental dramatically (sadly rental price also affected by new development), got new tenants on the grounds that we'd figured out even to subsidise it by several hundred pounds a month for six months, would get us out of the redemption penalty period, and hopefully the market will have stablised.

Either way - as its jointly owned, I think we should be fairly safe on the CGT issue, if we're lucky, we might break even on what we paid for it!

Really do appreciate everyone taking the time to answer/update the query , its very much appreciated.

[An Englishman in Scotland]

Hold on there's more...
In addition to the above, if you have been letting out your UK property, the final 3 years of gains (or £40,000 - whichever is the lower amount) are free of Capital Gains Tax...

So simply put, if you emigrate and rent your UK house out, you have 3 years to sell it (or move back home) before any CGT starts to accrue (and even then you have taper relief and personal annual exemption to offset against it).

So that's our plan (when I complete my professional qualifications and gain a job offer in NZ!)

[Jo Jo]

My understanding is that if you are paying tax in NZ and have filled in the form giving you double taxation relief, then you are NOT liable to CGT on your house in the UK. And NZ doesn't have CGT (yet - there is discussion about introducing it), so you won't be liable for it in NZ either, though.

Info about double taxation relief here:http://www.hmrc.gov.uk/international/dtr1.htm

The double taxation relief form is here: http://www.hmrc.gov.uk/cnr/nz_indiv.pdf

And this is what HMRC says about liability for CGT once you have been granted double taxation relief (my highlighting):

Capital gains

9.14 Under many agreements, if you are a resident of another country for the purposes of the agreement, you will often be liable to tax only in the other country on any gains you make from disposing of assets. In that case, you will be exempt from capital gains tax in the UK even if you are ordinarily resident here. If, however, you are carrying on a trade or running a business through a permanent establishment in the UK, any gains you make from disposing of assets connected with the permanent establishment will continue to be chargeable to capital gains tax in the UK.

http://www.hmrc.gov.uk/pdfs/ir20.htm#leaving

But I'm no expert - you should speak to an IFA or accountant.