Tax on UK house sale after 5 years in Oz?

[desreb]

Hi,

 

We moved from the UK in Feb 2011, and were considering moving back when our tenancy both here and there comes up for renewal in mid September. We've been leasing it in the UK, and never bought in Oz.

 

I had remembered the six year rule for primary residence, and was looking it up since we come to that point in Feb if we decide not to return to the UK.

 

While I was looking, I checked UK tax law and was alarmed to see that selling our UK house after October 2016 may no longer attract UK tax relief as a primary residence if we remain abroad.

 

It might then get into a complex series of requirements about returning to live and work in the UK to claim residence in order to achieve a tax-free sale.

 

Is my reading of this correct?

 

Thanks,

 

 

D

[desreb]

Ok, it seems that we are liable for UK CGT tax on the house for the period since April 2015, but we can offset that against our Australian tax paid (I think/hope income tax, as we have no AU CGT)

[Chortlepuss]

How much has your house increased in value since April 2015? Especially given the brexit effect.. In a similar situation as you but reckon my house (South East) has decreased a bit in value - I'm pretty sure I can't claim a capital loss!

[Ken]

Ok, it seems that we are liable for UK CGT tax on the house for the period since April 2015, but we can offset that against our Australian tax paid (I think/hope income tax, as we have no AU CGT)

 

There's an exemption for the last 18 months that you own the property - so for example if you sold now there wouldn't be any UK tax to pay.

[Alan Collett]

Hi D.

 

You may find that selling while not UK resident is preferable in a UK CGT sense than selling after the resumption of tax residence.

 

If selling the UK property and returning to the UK is an option I recommend considering having a pro forma CGT computation prepared which compares the two options - ie sell while not resident vs sell while resident - so you can make an informed decision.

 

Best regards.

[Diane]

Just wanted to say this is one of the things that is wonderful about this forum - above me we have two professionals happily giving great and really helpful advice for free. You are both awesome :notworthy:

[desreb]

Thanks for the advice Ken, Alan. It does look like we can offset UK CGT paid against AU Income Tax when we sell, if we stay here. I'm currently looking into whether we can actually claim a loss since April 2015 as the house has decreased slightly in value since then.

 

Of course, the way the market is at the moment (I love the way property and stockbroking get to use words such as "soft" and "correction"), there is a considerable risk of not completing before AU tax kicks in at the 6 year mark, at which point we'd have to cease leasing if if we stayed in Oz, until it sold.

[Alan Collett]

Thanks for the advice Ken, Alan. It does look like we can offset UK CGT paid against AU Income Tax when we sell, if we stay here. I'm currently looking into whether we can actually claim a loss since April 2015 as the house has decreased slightly in value since then.

 

Of course, the way the market is at the moment (I love the way property and stockbroking get to use words such as "soft" and "correction"), there is a considerable risk of not completing before AU tax kicks in at the 6 year mark, at which point we'd have to cease leasing if if we stayed in Oz, until it sold.

 

 

Hi again D.

 

I recommend authoritative advice on the question of claiming a foreign tax offset on your Australian tax return.

 

Also, the tax position in Australia might not be as you are expecting it - a pro forma CGT tax computation for a future UK property disposal prepared under Australian tax rules may be worth having so you can make an informed decision?

 

Best regards.

[desreb]

Hi Alan - I have taken advice already, and so was sharing a summary of that for any others in similar circumstances in the future. I do still have some open questions with the accountant which I'm waiting for an answer on.

[Alan Collett]

Hi Alan - I have taken advice already, and so was sharing a summary of that for any others in similar circumstances in the future. I do still have some open questions with the accountant which I'm waiting for an answer on.

 

 

Can I say then that if you already have a professional advising you I recommend you pursue matters - and the questions you have asked above - with that professional, and get the position set out in writing.

 

Best regards.

[desreb]

Can I say then that if you already have a professional advising you I recommend you pursue matters - and the questions you have asked above - with that professional, and get the position set out in writing.

 

Best regards.

 

Thanks Alan. I assume one of my mistakes you're referring to is that the UK CGT gain can only be offset against an AU CGT loss, including in future years, but it cannot be offset against AU Income Tax. I did have that as an outstanding question and was corrected on that. This does change my outlook, as I haven't made a CGT loss (and don't intend to).

[Alan Collett]

Thanks Alan. I assume one of my mistakes you're referring to is that the UK CGT gain can only be offset against an AU CGT loss, including in future years, but it cannot be offset against AU Income Tax. I did have that as an outstanding question and was corrected on that. This does change my outlook, as I haven't made a CGT loss (and don't intend to).

 

 

Hi again D.

 

Please don't make assumptions about my comments.

 

If you want authoritative advice on which you can rely please get the advice in writing after paying a fee.

 

Best regards.