Tax On A House Abroad

mr_fishbulb

My dad's buying a house in New Zealand. The rent should easily cover the mortgage. The rent will be paid into a NZ bank account and the mortgage taken from it.

When he decides he wants to selll the house in some years time, he'll need to transfer all the money (from the sale plus the stuff he has accumilated in the bank) back to the UK. What sort of tax is he going to be liable to pay on that?

Cheers.

Ian_W

Can get a bit complex, mr_fishbulb and I'm no expert, just someone who has owned property abroad. Residence and domicile are complicating factors but I'm assuming your dad is British and residing here. If he's a Kiwi and intends to return in the future then I think he needs prof advice.
On that assumption, your dad will be liable for worldwide earnings in the UK so will have to declare and pay income tax on any profits from letting whether or not the money stays in NZ. He can deduct running expenses from income and any NZ tax he pays, provided they have a no double taxation treaty with UK, which they probably will.
When he sells he may also be liable to CGT on the gain between the buying and selling prices. He can deduct buying and selling costs, any capital expenditure to improve the property, taper relief [reduces the gain the longer owned] and his CGT allowances. As above if he has to pay CGT in NZ that may well also be deductable.
HTH.

missk_ensington

Capital Gains I would think (Although I don't know for definate) if he is UK resident then I think he will be liable exactly the same as if the property was in England. You'd have to check it out for sure with someone who knows about this. A way around it could be (although don't quote me on this) is to a) have a disabled relative living in the house b) Ensuring it is in joint names as a person get £7,500 allowance, so for 2 people that would £15,000 profit youre allowed to keep. I'm sure other people will have better idea's than this though, this isn't really my forte.

mr_fishbulb

Cheers guys. Is capital gains tax applied if you own more than one house? If my parents put their house in the UK into my mum's name and the NZ house into my dad's name then would that cover it or does it still need to be paid?

Ian - yes my dad is British and doen't intend to move over to NZ.

Ian_W

I don't think it would work, the relief is for your principal residence [PPR] and it's a factual test so I'd be very surprised if it was allowed being as how his commuting distance to work would be pretty astranomic!!
The CGT personal relief is £8,800 EACH, current tax year - so having 2 through joint ownership is obviously better than what they're thinking ATM if he can't claim PPR.
I really think he should get professional advice before making these decisions to see the most tax efficent way of doing it. You can only usually tax plan in advance, once you've decided on a course of action you're stuck with it tax-wise.

mr_fishbulb

Cheers. He has a NZ accountant at the moment but I'll tell him to get some UK advice too.