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Sam
Sam, Accountant
Category: UK Tax
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Primary residence election for a home abroad

Resolved Question:

How can i elect a home abroad as my primary residence? I live in a rented home in UK. The new home was purchased more than 2 years ago, but has been under construction and has been given to us for purpose of residence only last month.


 


- Can i elect this as my primary residence for PPR relief? Do i need to explain why i have not declared this in the 2 year period? Or will HMRC ask and then i reply?


 


- Is my position impacted if i have other residences abroad (but none in UK)?

Submitted: 1 year ago.
Category: UK Tax
Expert:  Sam replied 1 year ago.

Hi

 

Thanks for your question

 

How could this be your main residence as you live in the UK, as there has to be fact behind any election made for a property to be deemed to be a main residence, in so far as, it is used as a main residence, and aside from the fact this will be dismissed as an election due to that you clearly live in the UK, as the two year window has passed, this also makes it impossible for the election to be considered.

And a main residence position does not rely on the fact a property is owned, its regarding where is actually your home, which again is clearly this rented property in the UK.

 

Sorry the news is not better

 

Thanks


Sam

Customer: replied 1 year ago.


So if i happen to sell any house of mine will I be liable for CGT? How will i qualify for PPR?

 

Since i don't own a home in UK, can't i elect this house (abroad) if i furnish it for my own use and actially use it for few weeks each year when i visit?

 

I saw an example of a case like mine on HMRC website however in that case both the owned house and rented were in UK.


Also - i would like to add that I am not domiciled in UK, i have lived year for the past 6 years, all my financial assets are abroad.

 

Expert:  Sam replied 1 year ago.

Hi

 

Thanks for your questions

 

If any time this property abroad was your main residence, then PPR is given for the time that you lived there and up to last 3 years of ownership (under the PPR rules)

 

No you cannot elect a property abroad as your PPR, as whereas with a property in the UK (that is NOT rented out) its possible for you to actual spend considerable time in it (along with another owned property or when you rent elsewhere)

But yours isn't even in the same country.

 

As you are bot domicile, if you do NOT bring the sale proceeds into the UK, then you may be able to ask for this gain to be disregarded for UK tax purposes, but this will result in a loss of personal allowances for the year, and depending when this property is sold if you have been in the UK for 7 out of the last 9 years) you will also incur a remittance basis charge.

 

And if the money is in brought into the UK, then it will form a liability here under the normal rules of UK taxation.

 

But I must stress as its been more than 2 years since you bought the property in question, so its too late to elect anything as a main residence so your ability to nominate has ceased.

 

See here from the HMRC capital gains manual as what can be nominated for information purposes

http://www.hmrc.gov.uk/manuals/cgmanual/cg64545.htm

 

 

There are extensions for the private residence relief on property which has been the main residence and now no longer is, due to employer providing accommodation etc, but again on the basis of the information provided these do not fall within the criteria of what you advise.

 

 

And I will also add the time limit for the two year election starts from the time a change of residence position changes.

 

You advise that you use this house for a few weeks each year, but this is not where you conduct most of your life, and from what you advise have never lived there on a any full time basis, so the property would not qualify anyway.

 

Thanks


Sam

 

 

 

 

Customer: replied 1 year ago.


Thank you Sam, your answer clarifies.


 


So if i do not elect this house as PPR, but i still sell it at some point, can i take the following course of action?


If the house sells for £100,000 of which Capital Gain is 40,000 and cost was £60,000 then can i:


(a) remit only 60,000 to my UK account and claim this as my original investment hence no CGT? (i am still under the 7 year period)


(b) remit £75000 to UK, show 60,000 as my cost and pay CGT on the £15000?


 


In future years can i then opt out of 'remittance basis' and show how i have invested the remaining £25000 in the country of origin and pay tax on any income earned thereof?


 


i.e. by doing this can i avoid paying CGT in UK for a part of my gain (under remittance basis)


 


Thank you for your advice.

Expert:  Sam replied 1 year ago.

Hi

 

Thanks for your further questions

 

1) No, any money remitted will be considered as a considered capital gain, which will trigger HMRC having to review the sale, which will consider the whole position as there can be no half measures (its all or nothing)

 

2) NO as per the answer at 1)

 

You can only claim the remittance basis IF NONE of the income is remitted to the UK, so any remittance of money will automatically see you as being taxed under the normal tax regime - known as the arising basis.

 

 

Thanks

 

Sam

 

Customer: replied 1 year ago.


Thank you Sam,


 


One last question (hopefully!) - if i do not remit when i sell (and under remittance basis pay no UK Tax) but at some point in the future when needed i bring that money to UK (part/whole) - how will it be treated at that point?

Expert:  Sam replied 1 year ago.

Hi

 

Thanks for your response

 

If you do not remit this money to the UK, then in the tax year of sale you declare remittance basis to HMRC - which will see a loss of personal allowances for that tax year (from your UK income positioN) and if you have been living in the UK for more than 7 years at that point, then you will be charged £30,000 remittance basis charge. (if less than 7 out of the last 9 then you will just lose your personal allowances)

Then if a few years down the line you then do bring the money in, then there is no tax position to suffer at that time.

This is whether whole or part.

 

If I could trouble you to rate the level of service you have received, it would be appreciated as this ensures I am paid.

 

Thanks


Sam

Sam, Accountant
Category: UK Tax
Satisfied Customers: 12934
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
Sam and 3 other UK Tax Specialists are ready to help you
Customer: replied 1 year ago.


Hi,


 


I have been made to understand by my chartered accountant that the above advice is not entirely correct.


 


i.e. if i remit my money to UK a few years down the line, at that time i will be subject to CGT. The only exception is if i had paid £30000 RBC at the time of sale of the asset. (i.e. if i do not pay RBC on account of being in the 7 year window then i will be subject to CGT whenever i remit the money)


 


Can you please provide your veiw.


 

Expert:  Sam replied 1 year ago.

Hi

 

Thats is incorrect and I am shocked a chartered accountant would suggest such a thing! CGT arises in the year of sale, not the year that the money might finally be remitted ! And if you have paid the RBC - then this is instead of the capital gain, so later years will see you being able to remit this money with no further charge arising.

 

But to save argument, ask HMRC, they will set you right - as you are in the difficult position of not knowing whether your certified chartered accountant is right, or an experienced HMRC ex employee, and its imperative you are satisfied that you understand the implications

 

Thanks

 

Sam

Customer: replied 1 year ago.


Hi Sam,


 


Sorry for this but i think i may have not conveyed the situation clearly here and i hope you don't mind clarifying this for me one last time.


 


I am currently within the 7 year period of residency and hence I am not liable for the Remittance Basis Charge at all.


 


So if i were to sell my property now, i do not pay CGT in UK.


 


However, if i do remit the money next year - what is my tax liablity?


 


Am really sorry if am repeating myself, but from your above answer am able to read the RBC situation but not mine.


 


Thank you once again.

Expert:  Sam replied 1 year ago.

Hi

 

Thanks for your question

 

If you sell now (which is within the 7 year period) you will not pay CGT but will lose your entitlement to personal allowances, as this amount t will clearly be in excess of £2000 and must ask to be taxed under the remittance basis.

 

If you remit the money into the UK next year, then there is still no capital gains to pay, as you have asked for the remittance basis in the year of sale, and you cannot be held liable to tax on the same arising income for anything other than the year in which it arose, which would be the year you claimed the remittance basis.

So the only tax position you might be need to consider is

1) Any additional investment income that arises on this lump sum (so interest awarded on the original amount) which is then considered for income tax and

20 Whether you have made additional money by virtue of the exchange rates, which falls under the capital gains regime (but if less than £10,600 then is exempt as covered by the annual exemption allowance)

 

Thanks

 

Sam

Customer: replied 1 year ago.


Thank you Sam,


 


This is fantastic.


 


Can you kindly clarify how can i check this with HMRC? Do they operate a query service?


 


Also, if i need your professional services in this regard - for filing tax etc. then do you provide these services - or are you aware of tax consultants who could help me out with this?


 


Thank you very much!

Expert:  Sam replied 1 year ago.

Hi

 

You can ring the main helpline number, and a message will be passed through to the technical team, but you may have to wait up to 5 working days for a call back or write in c/o the technical team.

 

The contact details for phone or letter are per the link here

http://search2.hmrc.gov.uk/kb5/hmrc/contactus/view.page?record=gwYsnAv-zT8&titleindex=0

 

Sadly, through our affiliation with Just Answer we are not permitted to engage clients on a one to one basis away from the Just Answer website, but find an accountant close to you, that is specialised in both residency and the remittance basis of tax.

 

Thanks

 

Sam

Sam, Accountant
Category: UK Tax
Satisfied Customers: 12934
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
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