[Moorf]

I am considering selling my rental property in the UK now that we are certain we are staying.

Will I have to pay Capital Gains Tax? Bought for £26k now worth c. £100k, mortgage £45k, rented out since 1993, paying tax on the income etc from it, lived in it for a minimal time during transit from UK to NZ (i.e. 3 months).

Is there any way I can get out of paying it or lower the rate of Cap Gains liability, i.e. out of country for xx time, gaining PR in NZ?

Any advice would be a great help.

Thanks
Moorf

[richard]

Moorf

Assuming that your capital gain is £29k (100-26-45) then I would say you would have no CGT to pay.

Things may have changed but I didn't pay anything when I sold my flat in London. For a start you have your personal CG allowance and I think you only have a 60% liability on your gain due to taper relief as you have had the flat for so long but more importantly:-

http://money.msn.co.uk/mortgages/Insight/SpecialFeatures/TopTips/sellletproperty/default.asp

"There are three further potential reliefs. The first applies to landlords who move into their buy-to-let property after the last tenant has moved out. By doing so, you may claim the property as your principal residence, because by doing so, the last three years’ worth of gains become tax free.

Anna Bowes of Chase de Vere Private Clients comments, "To claim this relief, you must take up residence and be able to prove that you live there - for instance by having your mail redirected and being able to show that you used the facilities there by keeping copies of utility bills."

There is a further £40,000 exemption on all buy-to-let properties where the landlord takes up residence in this way."


so hopefully 29k-40k= No CGT

There may be a further complication from an NZ point of view as you may have some liability to the NZ tax people on any gain since you have been here but since you said in December:-

"I have a 1 bed flat on the seafront in Worthing that I rent out.

I had it valued end of 2003 at £110k

I had it valued 3 weeks ago at £90k "

You may be ok. :nice1

[Moorf]

Cheers Richard - tax makes my brain go numb :roll:

Ok.. numb-er :?

Will have to do the sums to see whether selling is going to be more profitable than the clear profit from the place each month (which amounts to c. NZ$300). Looks like over the years it will be best to keep it... I go thru this scenario once a year and always end up keeping it!! :laugh

Owwww head hurts... :wah

[isv]

Moorf,

If it turns out that the CGT is due taper relief could come in to play so the gain might not be too great BUT you should get approval from Inland Revenue first - you cannot just assume you can have it as it is at their discretion.

Note that there is no CGT in NZ on property bought for rental purposes (as opposed to buying and selling-on for a quick profit). Once you have been out of the UK (non-resident for tax purposes) for a full tax year my understanding is that you should be able to sell it on for no CGT whatsoever.

HOWEVER, should you decide to rent out a property in the UK whilst in NZ there are some 'special' UK tax rules for overseas landlords... (cannot recall right now which IR publication has that bit).

Suggest you download/read the IR publication on residency/CGT etc. Publication: IR20

It may well be worthwhile paying for a bit of specialist advice.

Alan.

[Moorf]

Cheers Alan - lots there for me to follow up :nice1

[Paul]

Moorf

Regardless of calculations, as you are presumably non resident for UK tax purposes now you will not be subject to UK CGT. There are issues if you then return to UK for any extended period of time (over 6 months basically) in the next 5 years .
However be careful of the timing of the sale and make sure you are not UK resident in the tax year you are selling (to be safe sell your property after 5/4/2005 for instance)

The NZ implications of this "tax free" income may be different but as I am a UK accountant I cannot answer!!

Hope this helps!

pm if you want further info as I don't like posting professional advice on internet

[Glenda]

Hi,

Have read the above with much interest.

Am I right in saying there is no CGT in NZ?

We have another property and some bits of land in the UK which are somewhat 'locked up' at the moment. When we go to NZ am I right in saying it would be prudent to wait one year plus before selling so that we do not pay UK CGT?

It seems there just might be some tax implications as a NZ taxpayer in selling property abroad - does this mean it is assessed as 'income' and taxed as such?

Do hope someone knows. It is about time things went right for us in the tax/finances department.
:hopeso

[isv]

Hi,

Have read the above with much interest.

Am I right in saying there is no CGT in NZ?

We have another property and some bits of land in the UK which are somewhat 'locked up' at the moment. When we go to NZ am I right in saying it would be prudent to wait one year plus before selling so that we do not pay UK CGT?

It seems there just might be some tax implications as a NZ taxpayer in selling property abroad - does this mean it is assessed as 'income' and taxed as such?

Do hope someone knows. It is about time things went right for us in the tax/finances department.
:hopeso

Glenda,

Even if living in NZ you will be subject to UK tax on any gains you make during a tax year during which you have also been a UK resident. There is a double taxation agreement that kicks in to ensure you dont pay tax twice but the UK IR would get first bite of the cherry... Better to be completetly out of reach by ensuring you are non-resident for tax purposes.

I think it comes down to ensuring you are non-resident for tax purposes in the year you dispose of any assets. ie - ensure you are out for a full tax year first. I dont think you would have to wait until the end of it before making disposals but just make sure you are out (non-resident for tax purposes) of the UK for the full (tax) year.

If you have land/property that has been held for some time (and not just turned around for a quick profit) then my understanding is that CGT will not apply in NZ. There are rules that apply to non-resident companies and (in particular) trusts which might cause a disposal to be treated as income and taxed as such.

It may be worthwhile finding an accountant in NZ who specialised in CGT issues and getting an opinion from them. I would certainly recommend you read 'IR20' (and others) from the UK Inland Revenue.

Alan.

[Glenda]

Hi Alan,

Thanks for clarifying that. We seem to be one of those families who keep accountants and tax officials in business. Got a sneaky feeling that won't change in NZ. :wah :laugh