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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: UK Tax
Satisfied Customers: 3656
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based)
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Id appreciate advice on the following please: My husband

Resolved Question:

I’d appreciate advice on the following please:

My husband solely owns a buy-to-let property in England and he would like to sell it. He has incurred losses during the past 5 years, due to vacant periods and repairs etc. He currently owns no other property in England, and he is not a UK resident, therefore he believes that these losses will not be of any tax benefit to him.

I separately own 3 buy-to-let properties in England, and we would like to know what needs to be done in order to transfer his losses to my properties. Is it a matter of instructing a conveyancing solicitor to include my husband’s name on the title deeds of one or all of my properties? If this is the case, what period of time must then pass, if any, before he could sell it? Ideally, he would like to sell his property ASAP. Or should I have my name included in his property’s title deeds before he sells it?

He also sold a property earlier this year which was solely in his name, which had incurred some loss of income. Is it possible to retrospectively transfer these losses to my property accounts?

He has completed UK tax returns every year (he was advised that he was required to make a return because he had a tax number in the UK as he worked there for a period of time). I have not made any tax returns, as I have not made a net profit, and I was previously advised that I wasn't required to make a return until I make a profit. Will my husband have to continue making returns, though, for his new co-owned properties, or should I continue with not filing a return, until a net profit is made?

We don't plan to live in the UK in the future.

Thank you.
Submitted: 1 year ago.
Category: UK Tax
Expert:  taxadvisor.uk replied 1 year ago.

Hello, if you have any questions or need further clarification after reading my answer please let me know.

 

Thank you for your question...

 

Please advise what the likely gain is to be from sale of your husband’s property?

Are you both currently living in the UK and likely to live in this country for the foreseeable future?

 

You say you have 3 buy to let properties in your name but have not made any profit. What is your rental income?

Do you have other income?

 

Many thanks

Customer: replied 1 year ago.

Thanks for your reply.


 


He expects to sell it for £40,000 less than the purchase price. He sold his other property at a loss of £15,000 earlier this year.


 


We are not UK residents, and we will not live there in future.


 


The net income from my own 3 properties is in minus figures - with accumulated losses, it stands at almost -£4,000 currently.


 


We don't have any other UK-based income.


 


Thank you.

Expert:  taxadvisor.uk replied 1 year ago.

Eileen, thank you for your reply and additional information.

 

My answer to points raised by you is as follows:

 

[Question] My husband solely owns a buy-to-let property in England and he would like to sell it. He has incurred losses during the past 5 years, due to vacant periods and repairs etc. He currently owns no other property in England, and he is not a UK resident, therefore he believes that these losses will not be of any tax benefit to him.

 

These losses would only have tax benefit if there was a capital gains chargeable event in the future. Furthermore, You must notify a loss to HM Revenue & Customs (HMRC) within the time-limits allowed for it to become an allowable loss.

 

More information on how to claim a loss and the time limits for doing so can be found here

http://www.hmrc.gov.uk/cgt/intro/losses.htm#3

 

[Question] I separately own 3 buy-to-let properties in England, and we would like to know what needs to be done in order to transfer his losses to my properties. Is it a matter of instructing a conveyancing solicitor to include my husband's name on the title deeds of one or all of my properties? If this is the case, what period of time must then pass, if any, before he could sell it? Ideally, he would like to sell his property ASAP. Or should I have my name included in his property's title deeds before he sells it?

If the properties you own in your own right are likely to generate a capital gain on sale then you should consider making him a joint owner so that he could utilise some or all of his allowable losses against future gains. You should register his beneficial interest on the title deed. This way your share of the gain would be reduced with overall reduction in potential capital gains tax, if any.

 

In my opinion. you should remain owners of the joint property for a period of 3-6 months before you sell it in order to alleviate any chance of HMRC challenging your motive of transfer.

 

In view of aforementioned comment, if you are likely to make gains from sale of your properties then it would be a good idea to have your name added to his property, because you would be able to claim a loss. If you don't normally complete a Self Assessment tax return, you should claim the loss by writing to HMRC. You must keep any records showing how you worked out your loss and send your calculations with your tax return.

 

HMRC contact details for capital gains tax are

HM Revenue & Customs
Capital Gains Tax
PO Box 1970
Liverpool
L75 1WX

 

You can also call them on Taxes helpline 0300(NNN) NNN-NNNN.

 

Your husband would have to declare his share of the income from jointly owned property when he files his tax return.

 

[Question] He also sold a property earlier this year which was solely in his name, which had incurred some loss of income. Is it possible to retrospectively transfer these losses to my property accounts?

It is not possible to retrospectively transfer losses to your property accounts after the event, I'm afraid.

 

[Question] He has completed UK tax returns every year (he was advised that he was required to make a return because he had a tax number in the UK as he worked there for a period of time). I have not made any tax returns, as I have not made a net profit, and I was previously advised that I wasn't required to make a return until I make a profit. Will my husband have to continue making returns, though, for his new co-owned properties, or should I continue with not filing a return, until a net profit is made?

Your husband should continue to file his UK tax return unless HMRC advise him otherwise. When he stops receiving an income from UK source then he should contact HMRC and request HMRC to review his case and give clearance that he should not file a tax return.

 

You say you have not filed any tax returns on previous advice. You may at present not be making a profit from property letting, but you if are in receipt of £10,000 or more from property before deducting allowable expenses (and not net income) then you should be filing a tax return.

More information on who needs to complete a tax return can be found here

http://www.hmrc.gov.uk/sa/need-tax-return.htm

 

You can contact HMRC Self assessment for confirmation not to file a tax return by writing to

 

HM Revenue & Customs
Self Assessment
PO Box 4000
Cardiff
CF14 8HR

 

You can also call them on Taxes helpline 0300(NNN) NNN-NNNN.

 

Finally, if you do decide to make your husband a joint owner of your property/properties, you should seriously consider disposing of the one with the maximum gain first to take advantage of loss claim at its earliest opportunity.

 

If you need more information please let me know before you rate my service.

 

I hope this is helpful and answers your question. If you are happy and there are no more issues I will appreciate if you would kindly rate the service I provided to ensure I get paid for it.

 

I am available for any follow up questions you may have, and you can use the reply button to post your follow up questions to the page.

 

Customer: replied 1 year ago.

I had understood that, as non-residents, we are not liable for capital gains tax. Can you please confirm whether we are now liable, due to changes introduced in Finance Bill 2013? If we are now liable for cgt, the information you have provided on this will be very helpful and relevant to us.


 


We are currently more concerned about tax on UK rental income: His yearly costs have exceeded his rental income for the past five years. These accumulated costs have been carried forward in his yearly tax returns and, as it is a considerable amount, we would like to have these costs transferred to my property accounts prior to selling his property, so that these losses can be carried forward and of benefit when/if I make gross rental income profits in future. We therefore need to know what course of action is required in order to ensure that these costs are transferable: Should I become joint owner of his property before he sells it, or should he become joint owner of one, or all, of my properties?


 


Thank you for your help, and it will be fine to answer this question on Monday, if you wish.

Expert:  taxadvisor.uk replied 1 year ago.

Eileen, thank you for your reply.

 

If you were to sell the properties whilst you remain non resident in the UK for tax purposes (you say you are not living or will not be living in the UK) then any gain from sale of property will not be chargeable to UK capital gains tax.

 

I would like you to look at this link to HMRC web page and in particular look at Q5-Q7.

If the sales took place whilst you are not living in the UK and you have no intentions of returning to the UK within 5 full tax years of leaving the country, you will avoid CGT.

http://www.hmrc.gov.uk/cnr/faqs_capgains.htm

 

Changes in Finance Bill 2013 affect residency. As you will be abroad and have no intentions of returning, it should not change your status from non resident in UK to resident in UK. More information on statutory residency test can be found here.

http://www.hmrc.gov.uk/international/rdr3.pdf

 

Losses on rental income can not be used against capital gains from sale of property.

As you are making losses on property income, there is no real advantage of doing so.

Moreover, you will only be able to carry forward losses from the time the property becomes a joint property and utilise them against future profits. You will not be able to apply this to historical losses to date.

 

I hope this helps.

 

If you need more information please let me know before you rate my service.

 

I hope this is helpful and answers your question. If you are happy and there are no more issues I will appreciate if you would kindly rate the service I provided to ensure I get paid for it.

 

I am available for any follow up questions you may have, and you can use the reply button to post your follow up questions to the page.

Customer: replied 1 year ago.

Thank you very much for your replies.


 


I have one brief, final question: If my husband bought another property before selling his current property, would he be allowed to transfer his accumulated rental income losses to his new property?


 


Thank you.

Expert:  taxadvisor.uk replied 1 year ago.

Eileen, thank you for your reply.

 

You can carry forward accumulated rental income losses from property letting to be offset against rental income business provided there is no break. He can only carry forward against the same rental business only .. ie. as sole trader and not mix and match properties owned in his sole name with properties owned jointly. More information on this can be found here

http://www.hmrc.gov.uk/manuals/pimmanual/pim4210.htm

 

and here

http://www.hmrc.gov.uk/manuals/pimmanual/PIM2505.htm

 

I hope this is helpful and answers your question. If you are happy and there are no more issues I will appreciate if you would kindly rate the service I provided to ensure I get paid for it.

 

 

taxadvisor.uk, Chartered Certified Accountant
Category: UK Tax
Satisfied Customers: 3656
Experience: FCCA - over 35 years experience as a qualified accountant (UK based)
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