CGT query UK and Australia

mrposhman

Since the turn of the year I have turned quite a good profit. I now stand at a profit of about £12k on £20k invested.

I will shortly be moving to Australia and am a bit worried about my CGT liabilities.

The aussie system isn't particularly nice on CGT from what I've read. It seems to be charged at 2 different rates based on your income.

If the asset has been held for less than 1 year then the full taxable gain is added to your income tax bill.

If the asset has been held for more than 1 year then the full taxable gain is halved and then added to your income tax bill.

Now this is much worse than the UK version so I was wondering what my options were.

Woudl it be possible for me to sell my shares now, some is in a normal trading account and some is held in an ISA so I shouldn't go over the CGT limit for this tax year if I sold them all.

If I then bought the shares back the day after (ok I may lose out slightly in dealing fees and the spread) or even later the same day is that ok and that can be my starting position for any later capital gains made once I've moved to australia? Obviously, the start date of holding the shares for aussie tax will start from a new day but will this be acceptable or would this be seen as tax evasion?

Thanks for your help in advance.

roger_c

I take it you are currently UK resident and domiciled (you probably will be if you were born here and never moved away)?

But say you were not going to Australia; If you were to sell your shares and say the day after you buy shares in the same company back again this is what is referred to as 'bed and breakfasting' and there is anti-avoidance legislation in the UK to counteract it. To stop yourself from falling foul of the anti-avoidance you need to hold of your re-purchase for 30/31 days (can't quite remember which) before repurchasing the shares.

Perhaps someone else can give their input?

mrposhman

roger_c wrote: »

I take it you are currently UK resident and domiciled (you probably will be if you were born here and never moved away)?

But say you were not going to Australia; If you were to sell your shares and say the day after you buy shares in the same company back again this is what is referred to as 'bed and breakfasting' and there is anti-avoidance legislation in the UK to counteract it. To stop yourself from falling foul of the anti-avoidance you need to hold of your re-purchase for 30/31 days (can't quite remember which) before repurchasing the shares.

Perhaps someone else can give their input?

Yep I am UK resident and domiciled though I will cease to be at the end of June.

I thought there would be some sort of anti-avoidance legislation but I was kind of hoping it won't come into the equation if I go abroad. I don't fancy paying tax at that rate and if I can reduce it then that would be great.

Lyndsay101

You're right Roger.. the base cost of the shares are matched firstly to shares acquired on the same day, then to shares acquired in the next 30 days, then to shares acquired prior to the sale

Lyndsay101

the next 30 day rule doesnt apply if your non-resident when you purchase the shares... im not sure how the split year residency rules would come into play here

roger_c

If you make a disposal in the tax year of departure, ie from now until 5 April 2010 then the disposal is chargeable to capital gains tax in the UK, so I am assuming that if you re-purchased within the 30 days, when say you were non-resident, and the disposal was made in the year to 5 April 2010 then it would still come into play.

You need to complete a 'leaving the UK form', which is called a P85. It can be found here:

http://www.hmrc.gov.uk/cnr/p85_p85s.htm

mrposhman

roger_c wrote: »

If you make a disposal in the tax year of departure, ie from now until 5 April 2010 then the disposal is chargeable to capital gains tax in the UK, so I am assuming that if you re-purchased within the 30 days, when say you were non-resident, and the disposal was made in the year to 5 April 2010 then it would still come into play.

You need to complete a 'leaving the UK form', which is called a P85. It can be found here:

http://www.hmrc.gov.uk/cnr/p85_p85s.htm

Thanks, I will be filling one of them in for sure as I will be claiming my overpayment in tax back as I get the full annual tax allowance even though I will only be here for 3 months so I'll get the tax I paid on my bonus back (or at least some of it).

So, if I dispose of some of my shares after I cease to be resident they are still taxable in the UK and not in Australia until April 2010 or will any gain be taxable in both?

roger_c

I have no idea if they are taxable in Australia, you would have to ask the Australian tax authorities, but yes they would be taxable in the UK.

If it so happens that the gains is taxable in both you can claim 'double taxation relief' in the UK equal to the lower of:

The tax due on the gain in the UK vs. the tax due on the gain in Australia,

ie you would pay tax at the highest rate (either the Australia or UK rate).