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Sam
Sam, Accountant
Category: UK Tax
Satisfied Customers: 12809
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
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I have recently sold a property in India but am in the process

Resolved Question:

I have recently sold a property in India but am in the process of buying another with most of the proceeds apart from the original purchase price . Exchange rate at time of purchase was INR70 = GBP1 But is now INR 98.5 to GBP 1 . Because I am buying another property equivalent in value to the capital gain I will be exempt from Capital Gains tax in India provided I retain the new property for at least 3 years . If however there is a differential then I will be liable to CGT in India at 19% . Do I need to report the sale to HMRC and in addition am I liable to any UK CGT .
Submitted: 9 months ago.
Category: UK Tax
Expert:  Joshua replied 9 months ago.

Joshua :

Thanks for your question. Please kindly RATE my answer when you are satisfied

Joshua :

Are you domiciled in India or the UK please for tax purposes?

Customer:

I am an Indian citizen married to a Briton and resident in the Uk

Joshua :

My apologies for the delay in reverting to you. I am looking at the double taxation treaty between India and the UK and I am finding difficulty finding evidence that there is a convention for CGT. I will ask a colleague to look at this who may have some further information as I do not want to give you the wrong information. Please do not reply to this thread in the meantime as it may prevent my colleague from replying.

Expert:  Sam replied 9 months ago.

Hi

 

I have been asked to respond to you - would you be happy for me to proceed?

 

Thanks


Sam

Customer: replied 9 months ago.

Hi Sam ,


 


Yes please do .


 


Regards


Radha

Expert:  Sam replied 9 months ago.

Hi Radha

 

Yes, could be a considered capital gain tax liability, but may I ask, was this first property ever your home ?

I also need to know

1) The date you purchased it and the purchase price (in sterling)

2) The dates that it was your main home

3) When you arrived in the UK

4) Are you taxed under the arising or remittance basis

5) How long you plan to remain in the UK

6) Was this property rented out - if so what dates and whether the rental income was brought into the UK, and if so has this been declared to HMRC each tax year

7) Will any of the proceeds of this sale, be brought into the UK

8) What price was the property sold for (in UK sterling)

9) Will you rent out the new property ? If so will the rents be brought into the UK

 

Then I can advise further

 

Thanks


Sam

 

Customer: replied 9 months ago.

Dear XXXXX ,


 


1. Purchased May 2005 for £47,101 ( approx)


2. it was never my amin home ( had intended to live in India for 6


months a year but that did not happen )


3.I have lived in The UK since I married in 1974


4.Arising ( only income in UK my pension amounting to £4,800 pa)


5. Permanently apart from 2 to 3 months in India each year.


6.No it was not rented out.


7. Yes in dribs and drabs but I intend to invest most if not all but the original purchase price in another property in Delhi or perhaps in Goa.


8. £280,612 ( approx)


9. No it will solely be for the use of ourselves and family and friends when visiting India .


 


For your information the property was bought from proceeds of sale of my mother's house after her death . That sale involved payment of substantial CGT in India at a rate of 19% and HMRC have had all details of that and any other income from India which by its nature is received after tax has been deducted at source at a rate of 30% . Sadly over the past 3 years there has been very little to pay as most of my investments lost rather than gained which is why I have had to sell the apartment in Delhi.


Finally I have read the Double Taxation Treaty between UK and India and I note that at Clause 14 it states that each contracting state may tax capital gains in accordance with the provisions of its domestic law .


 


Regards


Philip

Expert:  Sam replied 9 months ago.
Hi Philip

Thanks for your response and the additional information

As you are taxed under the arising basis, and have lived in the UK for so long then this capital gain must be declared to HMRC and tax will be due on this gain.
The double taxation treaty just refers to what incomes can be considered within the treaty, and has no bearing on the legal viewpoint, of where you are resident and what incomes/gains you have arising.

And had you suffered capital gains within the domestic state in which this property lays, then you would have been permitted to ask for this to be taken into account against the UK tax arising.

Your only other considered position would be to asked to be charged under the remittance basis for the tax year in which the property is sold (as you do not plan to remit this money into the UK) However, as you have been resident in the UK since 1975 - this will come at a price, with you being liable to the remittance basis charge.
The remittance basis charge allows non remitted income to NOT be included within the UK tax system - but when you have lived in the UK for more than 7 years out of 9 - this costs £30,000 and if you have lived in the UK for more than 11 out of the last 14 - this costs £50,000

Would you like m to undertake a calculation to show you what capital gains will be due ? And if so, please advise if this property was in your sole name. And the legal costs to buy and sell (and the costs of any capital improvements)

Thanks

Sam

Customer: replied 9 months ago.

Dear XXXXX ,


 


In view of my tax position here there would be no point in changing to the alternative taxation ( remittance as even were I to pay CGT on the full differential between £47K and 280K at 18% it would be considerably less than £50k plus any possible tax liability at around £42k less capital gains allowance ( £10,600 pa) for the year and the approx £5k available under Tax Free Allowance leaving liability at around £27K . So if I have to pay around this level of CGT in India would that clear things up ?.


 


However I was under the impression that in the UK as in India if proceeds are used to purchase another property then Capital Gain is not deemed to have been realised and would only apply on a final sale of property . I am assuming from what you


are saying that this is not the case .


 


The property ,by the way , was in my wife Radha's sole name and she owns no property in the UK


 


Regards


Philip

Expert:  Sam replied 9 months ago.
Hi Philip

Thanks for your response

First - I must point out that your gain will not just be liable to 18% - you have an amount equivalent to your unused basic rate band - that can allow that amount of gain at 18% and any remaining gain is then liable to 28% - so higher rate tax starts on annual income at £42475, so if you have an annual income of £30,000 - this leaves £12475 unused basic rate, and that equivalent amount £12475 will see capital gains at 18% and the remaining gain at 28%

And you are incorrect about what the proceeds are used for, a gain is look at in the position of the profit made on a sale of a property (when not the main residence) and nothing more. so the fact a further property will be purchased has no bearing. And a final sale has taken place (at each property is reviewed for its own capital gain at each sale point.
However if this property is in your wife's name, then the charge will arise on her, and not you and therefore to establish the true position please advise whether you answered the questions below on behalf of your wife (rather than your position)
1) The date you purchased it and the purchase price (in sterling)
2) The dates that it was your main home
3) When you arrived in the UK
4) Are you taxed under the arising or remittance basis
5) How long you plan to remain in the UK
6) Was this property rented out - if so what dates and whether the rental income was brought into the UK, and if so has this been declared to HMRC each tax year
7) Will any of the proceeds of this sale, be brought into the UK
8) What price was the property sold for (in UK sterling)
9) Will you rent out the new property ? If so will the rents be brought into the UK


Thanks

Sam
Customer: replied 9 months ago.

Dear XXXXX ,


 


All questions were answered in relation to my wife . So correct me if i am wrong , with annual income of £4,800 , she would have potential CGT liability of around £70k ?.


 


Regards


Philip

Expert:  Sam replied 9 months ago.

HI Phillip

 

That's great - I just needed to clarify this point, to ensure that I had provided accurate information.

 

I can provide a calculation - although please note this was not part of the original question, and Just Answer allow you ask one question (and clarification on that position) and additional work can either be posted as a new question (and you can always ask for me) or there is the facility to rate this answer and add a bonus.

 

Thanks


Sam

 

 

Sam, Accountant
Category: UK Tax
Satisfied Customers: 12809
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
Sam and other UK Tax Specialists are ready to help you
Customer: replied 9 months ago.

Sam ,


 


Just wanted to say thanks .


 


No further action required .


 


regards


Philip

Expert:  Sam replied 9 months ago.

Hi Philip

 

You are very welcome

 

Thanks


Sam

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