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We have a property in the UK which we bought in 1999. We lived…

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We have a property in...

We have a property in the UK which we bought in 1999. We lived there until May 2003 when we were relocated to France with my husbands company. We rented in France and our property in the UK was also let. In August 2006 we were relocated to Switzerland, where we live now. We bought a house here. The property in the UK has remained let. We are considering selling our property in the UK. Our questions are:

- will capital gains tax be calculated from the value at the moment we bought the property until now, or from the value when it became our second residence in August 2006, when we bought in Switzerland?

- how are the values worked out?

- Are there ways we can not pay the tax?

Submitted: 14 years ago.Category: UK Tax

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2/6/2009

UK Tax Professional: Tony Tax, Tax Consultant replied 14 years ago

Tony Tax, Tax Consultant

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You may be entitled to an exemption under the job-related accommodation rules and I shall delve into those and get back to you.

If the job-related accommodation rules don't help, then this is how it works. The gain is divided into the period of owner occupation and non-owner occupation on a straight line basis. So, the gain for the period you lived in it is exempt. You also get exemption for the gain for the last 36 months of ownership as a bonus. On top of that, you get a further deduction from the gain called letting relief which is the lesser of:

£40,000,

the gain for the period of ownership and the last 36 months combined and

the gain for the period of letting (excluding three years of course if they are at the end of the period of ownership).

Any calculation of the gain would be based on the original purchase price.

Tell me the cost of the property and the exact date of purchase, the date it was let and the value now and I'll work out the gain. It may be that you have nothing to worry about. Is the house in joint names?. If it is, each of yourself and your husband get a £9,600 personal exemption for the current tax year.

Tony Tax, Tax Consultant

Category: UK Tax

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Customer reply replied 14 years ago

Thanks for the quick reply. We bought the house in Nov 1999 for £130,000. We had it valued in August 2006 at £290,000 and it is now worth £250,000. We left the UK in May 2003, but didn't manage to let it until later that year - Sept 2003. And yes the house is in joint names.

Also, I read something on the Inland Revenue site about being non-resident for 5 full tax years. For us this would be April 2009 - we will not be returning to the UK before then. Does this have an impact too?

Thank you.

UK Tax Professional: Tony Tax, Tax Consultant replied 14 years ago

You may well qualify for exemption under the five year rule. However, these rules are complex and many have fallen foul of them. Some don't consider the possibility that the gain may be taxable in the country they have moved to. You might do well to consider getting some more detailed advice as the periods you have spent in the UK will need to be taken into account.

If you assumed the gain was potentially taxable in the UK, the sums are as follows:

Total period of ownership to, say, 5 April 2009 114 months Gain £120,000

Occupied by you to April 2003 42 months Gain £44,210

Vacant to August 2003 4 months Gain £4,211

Let from September 2003 to April 2009 68 months Gain £71,579 less last 36 months of £37,895 leaves £33,684

The gain is £120,000. Of that, the gain on 42 months plus 36 months which is £82,105 is exempt. This leaves £37,895 as a potentially taxable gain. However, letting relief of £33,684 eliminates all but £4,211 of this. The letting relief figure is the lesser of £40,000, the gain on the exempt period (£82,105) and the gain on the letting period less 36 months (£33,684). The balance of £4,211 is covered by your annual exemption of £9,600 x 2.

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