[UK tax]: Get expatted => home liable to CGT

[JR8]

Ouch.

>>> http://www.gt-ci.com/uploads/files/1546 ... nseyv2.pdf

[curiousgeorge]

This has been on the cards for a while now - closes the loophole that allowed people to be non-resident and still not liable to CGT as residents are. Hopefully will cool the UK property market a little as investments are less attractive.

[JR8]

Bitch if I have to pay CGT on my home, just cos I got sent abroad for a while.

p.s. Where does it lead? Before I will be expatted, in my 'full package' I demand a property valuation on my home.... ?

[curiousgeorge]

Bitch if I have to pay CGT on my home, just cos I got sent abroad for a while.

p.s. Where does it lead? Before I will be expatted, in my 'full package' I demand a property valuation on my home.... ?

Not really - you had to pay CGT before just by being resident in the UK. Now you have to pay CGT whether you are resident or not. You don't become liable because you are sent abroad...you were already liable! Basically, it means non-residents now have to pay the same tax as residents who benefit from increased property values in the UK.

If you return to the UK and take up residence in the property again, you still get the main residence discount when you sell. Its only if you sell while non-resident do you not receive that.

[JR8]

Not really - you had to pay CGT before just by being resident in the UK. Now you have to pay CGT whether you are resident or not. You don't become liable because you are sent abroad...you were already liable! Basically, it means non-residents now have to pay the same tax as residents who benefit from increased property values in the UK.

If you return to the UK and take up residence in the property again, you still get the main residence discount when you sell. Its only if you sell while non-resident do you not receive that.

No I didn't, not if it was my home [my 'Private Principle Residence'].
I've no idea where you're from, but I'm assuming you are talking about Brits, owning their only home in Britain....
The idea of being CGT liable on your home is enough to get pensioners dusting off their muskets and up on the parapets. Applying to foreign investors is one thing... but Brits who happen to go away for a few years.... ?
That's like.... 'oh you've been abroad, like those foreigners, so now you'll pay double income tax.

[Strong Eagle]

I reckon that curiousgeorge is a former UK citizen who gave up his citizenship when he successfully qualified for Singapore citizenship.

I see elements of US laws in the topic you are discussing. In the USA, you must have been occupying for at least 2 of the last 5 years in order to qualify for the capital gains exemption on a personal residence. It's one reason I elected to move back into my house for two years before selling and moving elsewhere.

And, JR8, it's not your "home", as you allege... your home is in Singapore or wherever. What you have is a rental property that used to be your home. You have made quite a few posts about being a landlord for your former home. When you move back to the UK and take up residence in your house, it will become your home. In the meanwhile, I struggle to see why you think you should be treated differently than other property investors simply because you used to live in the property and chose to keep it instead of selling it.

[JR8]

I reckon that curiousgeorge is a former UK citizen who gave up his citizenship when he successfully qualified for Singapore citizenship.

Ah, Indian then [/ironic]

I see elements of US laws in the topic you are discussing. In the USA, you must have been occupying for at least 2 of the last 5 years in order to qualify for the capital gains exemption on a personal residence. It's one reason I elected to move back into my house for two years before selling and moving elsewhere.

IME it's different in the US. Over there you seem to pay almost a 'wealth tax' based upon your home's value. Back in the UK you pay Council Tax, but that is closely correlated with the services the borough provides, and their cost. There's nothing punitive about it, it's just paying for what your household gets.

What you describe reminds me of the old 'last 3 years [PPR] rule'. You could move between homes, and if you established provable residency, via say 6 months of de facto residency, then claim that (and any gain) as your home for the last 3 years of ownership.

And, JR8, it's not your "home", as you allege... your home is in Singapore or wherever. What you have is a rental property that used to be your home. You have made quite a few posts about being a landlord for your former home. When you move back to the UK and take up residence in your house, it will become your home. In the meanwhile, I struggle to see why you think you should be treated differently than other property investors simply because you used to live in the property and chose to keep it instead of selling it.

That would assume SG is 'my home', which it isn't, and never will be; I'm simply passing time here before returning to my home. The government seem to directly or indirectly go to great lengths to make that situation clear. I expect most Brit-expats feel the same.

Historically there has been wide allowance made for people who have moved to work. That was all about aiding job mobility and employment. 'Move for work, keep your home and rent it out for a couple of years? = no problem, it won't be taxed like an investment property, i.e. like a business'.

And now? Get expatted and your home is now liable to CGT. It's a big change. So if I sell my home in 10 years time, I'll be liable to CGT because I lived in Singapore for a while. What am I being penalised for? [the property is let, I pay tax, the tenant pays tax, and council tax; sounds like quite the bonus to the state]. I do not know a single person who has ever paid any tax on the increase in their home's value.

Don't know. But potentially a biggie for Brit-xpats who consider moving here. Wouldn't want to do a stint here then go home and move and be handed a surprise fat bill from the IR, simply for moving abroad for a while.

[Strong Eagle]

You are still missing the boat. We have an annual property tax levy in Houston to support, city, county, state, and special taxing districts like schools. In Houston, the total annual property tax rate is approximately 2 percent of appraised value. If you are living in your home and/or over 65, you get an appraisal exemption which lowers total taxes 15 to 35 percent.

Then, there is the capital gains tax... payable if and when I sell my property. If I sell as a resident owner, I owe no tax, otherwise, I pay capital gains rates.

"Simply passing time here" is disingenuous, JR8... you ferking LIVE here... you are renting your home in the UK, aren't you? You are at least paying for taxes and insurance if not making a profit from the rents, aren't you? It's a RENT HOUSE, buddy, until you move back into it.

Now, if you continue to be penalized... that is... if you were to make your rent house your primary residence once again, and you cannot take advantage of residential occupation deductions, then that is not good.

Otherwise, you're blowing smoke out your arse... why should it matter where you live if you vacate your home and rent it out? Certainly, if you stayed in the UK and simply moved into a flat and rented your place, you wouldn't bitch, would you?

Nevermind... you probably would.

[JR8]

Then, there is the capital gains tax... payable if and when I sell my property. If I sell as a resident owner, I owe no tax, otherwise, I pay capital gains rates.

What would happen if you bought...
- bought that home, and lived there 3 years
- got expatted 3 years
- returned and lived there c4 years, then sold it
You'd pay tax on say 3/10 ie 1/3 of any increase in capital value, at say (UK) 40%?

So you buy a place at say 500k, those 10yrs later it's worth a million, but because you spent 3 yrs expatted you've got a tax bill of 3/10*(1000-500)=150k. That's £50k(S$100k)/yr of future liability accrued per year, due directly to being expatted.
This law is new this year.... UK expats might like to keep it in mind...

[One wonders if it is worth renting a UK home in one's absence. What would change if you simply left it vacant? Elected as your PPR, and paying the baseline bills as per usual].

"Simply passing time here" is disingenuous, JR8... you ferking LIVE here...

The suggestion was that Singapore is 'my home'.
It is my current place of residency, but it's not my domicile (technical tax word). One suspects the nuance would be lost of John Wayne.

It's a RENT HOUSE, buddy,

I'm unfamiliar with this term, but it sounds like it might be an old Elvis song.

Now, if you continue to be penalized... that is... if you were to make your rent house your primary residence once again, and you cannot take advantage of residential occupation deductions, then that is not good.

Ah, I finally seem to have got your ear. You see what I mean, right?

Otherwise, you're blowing smoke out your arse... ... you wouldn't bitch, would you? Nevermind... you probably would.

As charming and destructive as ever StrongEagle. 'Have a nice day'

[Strong Eagle]

What would happen if you bought...
- bought that home, and lived there 3 years
- got expatted 3 years
- returned and lived there c4 years, then sold it
You'd pay tax on say 3/10 ie 1/3 of any increase in capital value, at say (UK) 40%?

So you buy a place at say 500k, those 10yrs later it's worth a million, but because you spent 3 yrs expatted you've got a tax bill of 3/10*(1000-500)=150k. That's £50k(S$100k)/yr of future liability accrued per year, due directly to being expatted.
This law is new this year.... UK expats might like to keep it in mind...

I think your numbers are off or you haven't clearly explained. Is this what you mean?

a) In 10 years the price of the property rise from 500K to 1000K, for a taxable gain amount of 500K.

b) The capital gains tax rate is 40%, therefore if the property had been an investment property for 10 years, you would pay capital gains taxes of 500K * .40 = 200K.

c) But, the property was investment property for only 3 of the 10 years holding time. Thus, your actual tax payable would be 200K * .30 = 60K.

d) Or, as you calculated it, you capture 30% of the total gain and then tax it: 500K * .30 = 150K *.40 = 60K.

Do I have that right? It's still not an amount to sneeze at, and it's 20K per year liability, not 50K. I reckon expat landlords will have to factor this into the rent.

This is different than the IRS formula, and please don't tell the IRS about this. Under the scenario you described, I would still be able to claim my primary residence capital gains exclusion because I lived in my house for at least 2 of the 5 years preceding the sale. It's why I am in my house right now, even though I want to sell.

From a purely objective point of view, it could be said that the new law is reasonable... that you pay capital gains for the time that it was an investment property. OTOH, like American expats, it looks like the government has discovered that targeting expats is an easy way to generate revenue without much push back... we've got taxation of worldwide income and FACTA to deal with.

[curiousgeorge]

Not really - you had to pay CGT before just by being resident in the UK. Now you have to pay CGT whether you are resident or not. You don't become liable because you are sent abroad...you were already liable! Basically, it means non-residents now have to pay the same tax as residents who benefit from increased property values in the UK.

If you return to the UK and take up residence in the property again, you still get the main residence discount when you sell. Its only if you sell while non-resident do you not receive that.

No I didn't, not if it was my home [my 'Private Principle Residence'].
I've no idea where you're from, but I'm assuming you are talking about Brits, owning their only home in Britain....
The idea of being CGT liable on your home is enough to get pensioners dusting off their muskets and up on the parapets. Applying to foreign investors is one thing... but Brits who happen to go away for a few years.... ?
That's like.... 'oh you've been abroad, like those foreigners, so now you'll pay double income tax.

I was talking about Brits, but referring to ownership of a second home. CGT has always applied to second homes for residents - now it applies for non-residents too.

You can work away from your primary home for up to four years and still qualify for Private Residence Relief (i.e. no CGT)...though you may need to "nominate" your home to HMRC. And you still qualify for the first 12 and last 18 months for PRR.

I guess if you've not lived in it for six and half years, it's hard to pretend that its your "primary residence".

And if you spend minimum 90 days a year at the home, it still qualifies a your primary residence if you have nominated it as such or don't own other UK properties. But most expats want to be non-resident for tax purposes which is not possible if you spend 90 days a year in the UK...guess the system is designed to make you choose if you really are resident or not.

The other view is that if you're renting the entire property out, you're running a business, and have to pay CGT *on that period only* if you go back and live there. Its not like you're paying CGT on the entire gain.

But back to your first post - yes get a valuation in the month you relocate if you're going expat. Also take screen grabs of similar properties on the market, so you have something to show HMRC. And if you're already overseas you should get a valuation on the property ASAP, as you only pay on the gains since 5th April 2015, so it helps to have a valuation as close to that date as possible to demonstrate to HMRC what your gains are since then.

[JR8]

>>CG: I was talking about Brits, but referring to ownership of a second home. CGT has always applied to second homes for residents - now it applies for non-residents too.

Yes, I remember how if you owned a holiday home or rental/B2L you could ‘rotate’ the nomination of PPR for best effect, even nominating a rented out B2L...

>>You can work away from your primary home for up to four years and still qualify for Private Residence Relief (i.e. no CGT)...though you may need to "nominate" your home to HMRC. And you still qualify for the first 12 and last 18 months for PRR.

Ah yes, the form that covers this is ‘IR283’ IIRC. You used to get the final 36 months, but it was an easy target to get chopped in half at the budget, last year, or the one prior. You can see the direction that’s going.
[My understanding is if you live in the UK, own one property, it’s where IR write to you etc., then you don’t have to nominate/declare it etc. It simply is your de facto home].

>>I guess if you've not lived in it for six and half years, it's hard to pretend that its your "primary residence".

Yes I take your point. So, what’s this tax trying to do... they usually have a stated intention. Not leave England lol?

>>And if you spend minimum 90 days a year at the home, it still qualifies a your primary residence if you have nominated it as such or don't own other UK properties. But most expats want to be non-resident for tax purposes which is not possible if you spend 90 days a year in the UK...guess the system is designed to make you choose if you really are resident or not.

I pay UK tax on my whole income, yet get treated like a naughty absentee foreigner re: my home. Perhaps it’s one of the unintended contradictions that tax-law throws up now and again.

>>The other view is that if you're renting the entire property out, you're running a business, and have to pay CGT *on that period only* if you go back and live there. Its not like you're paying CGT on the entire gain.

It’s an interesting nuance. But as above, you can see the ‘direction’. Renting your home is treated as personal income, and for most landlords it goes on your personal tax return, same as the £12.50/pa bank interest you earn . The curiosity is that it is treated as ‘passive income’, as opposed to ‘active’ business income. IIRC the whole scheme came about to encourage job mobility, Tebbitt and the ethos of ‘get on your bike’ etc.

>>But back to your first post - yes get a valuation in the month you relocate if you're going expat. Also take screen grabs of similar properties on the market, so you have something to show HMRC. And if you're already overseas you should get a valuation on the property ASAP, as you only pay on the gains since 5th April 2015, so it helps to have a valuation as close to that date as possible to demonstrate to HMRC what your gains are since then.

Yep I’ve done this, and archived it. It’s times like these it pays to have a friendly agent who’ll know why you’re doing it, and pitch the value accordingly.

[JR8]

[Deleted: repeat 'MYSQLI error' again]

[Primrose Hill]

Yup, even the Tories are now taxing their own middle class voters.
JR8, earlier this April, I obtained 2 written valuation: 1. from a local estate agent and 2. a certified surveyor. We have no intention on selling at the moment. So, if we were to sell tomorrow, let say, the CGT liability for us will be the value at 6 April 2015, say GBP500,000 and 28% since we were a higher rate tax payer at the time of our departure. So, if our flat, let say we bought in 1974 which we paid GBP10,000,in April valued at GBP500,000 and tomorrow I am listing it at GBP750,000, I will have to pay CGT on GBP750,000*28%.
Alternatively, you can go back to London and share that 90days with your wife and then nominate that flat as your main residence.

[JR8]

It is something Brit-expats might like to consider; whether to get professional home valuations at their time of departure. And the consequences of what happens to their homes value while they are away.

When we're done 'on the road' I expect to return to that home for a while, get our freight in, mentally regroup, and then prepare and decide on somewhere 'less buzzing man' for us to move to.