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I moved from the UK to the Isle of Man nearly 4 years ago to

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I moved from the UK to the Isle of Man nearly 4 years ago to take up a full time permanent job. On arrival, I rented a property here, and rented out my UK house. I wanted to see how things might progress. I am now resident on the IOM and rarely visit the UK (my days in the UK are only in transit to holiday or to occasionally visit family and friends. Also, I have no UK earnings other than my rental income). Last year I bought a property on the IOM with the assistance of a mortgage from an IOM institution, and simultaneously re-mortgaged my UK property with the same institution. My UK property remains rented out, and the net income derived is declared for tax purposes on the IOM.
I would have sold my UK property some time ago but the market has been quite depressed. I bought the property for £500k in November 2003, and it was valued at £600k last June. I reckon I have spent around £50k over the years improving it, but probably don't have the relevant receipts any more. I am looking to sell my UK property at some point over the next 2 years, but on selling it will I have a liability for any form of UK tax? If I do, how will it be calculated/quantified and are there any steps I can take to mitigate it?
Submitted: 1 year ago.
Category: UK Tax
Expert:  Tony Tax replied 1 year ago.
Hi.

It's not clear from your question whether you have been disclosing your UK rental income to HMRC in the UK as it is taxable in the UK notwithstanding the fact that you live on the Isle of Man.

As far as selling your UK property is concerned, so long as you complete five full tax years as a non-UK resident for tax purposes you can sell it and you won't have to pay Capital Gains Tax in the UK. The five year period started from the first 5 April following your departure from the UK. If you sell the UK property before you complete the five full tax years as a non-UK resident, you will only have to pay CGT (assuming there is a taxable gain) should you return to live in the UK before the five year qualifying period is completed.

The gain from selling the property will be calculated by taking the disposal proceeds and deducting from them the purchase price, the costs of purchase, the cost of any improvements (costs claimed with no receipts or invoices in support may be disallowed) and the costs of selling.

Assuming the property was your main home, you will be entitled to exemption from UK CGT for the gain for the period that it was your main home and for the gain for the last 36 months of ownership. You will also be entitled to some letting relief. I'd be surprised if there was a taxable gain after those reliefs but that would depend on how long you owned and lived in the property and what you sell it for. This will all be academic if you do not return to live in the UK before the five tax years of non-UK residence are completed. Take a look at the HMRC helpsheet HS283 for more information on the main residence and CGT.

I hope this helps but let me know if you have nay further questions.
Customer: replied 1 year ago.

Thank you for your prompt response. I am pleased about not having a CGT issue. Regarding the rental income, I completed a Non Residents Landlord Form which allows the rental income to be paid gross. For tax year 2011/12, net income (i.e. after expenses) was just over £9000 which is around the UK single persons allowance? For tax year 2012/13, it will be a little less as the property was void for 6 weeks or so whilst a new tenant was found. I believe I am obliged to declare my world wide income for assessment in the IOM, which is what I have done. Should I being anything further as I don't want to fall foul of HMRC?


Thank you

Expert:  Tony Tax replied 1 year ago.
So long as the net rental income was less than your personal allowance for each year that it was let you should have no problems. You notified HMRC of your status as a non-resident landlord and were given leave to have the rent paid gross because I'm assuming you satisfied the conditions, ie there would be no UK tax liability. In those circumstances, the tax office do not always issue annual tax returns to the landlord and rely on them to complete them if necessary. Take a look here under the heading "What is the relationship to self-assessment?" for more information.

Take a look here for the personal allowances for 2011/12 to 2013/14 can be found here. The allowances for 2009/10 and 2010/11 can be found here.
Tony Tax, Tax Consultant
Category: UK Tax
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Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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Customer: replied 1 year ago.

Thanks Tony. I've double checked and my rental income is less than the UK personal allowance in each year sdo I think all bases are covered. thank you for your assistance, I can rest easy!


 


Cheers


 


david

Expert:  Tony Tax replied 1 year ago.
That's good news.

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