Rules on Capital Gains Tax

seven-day-weekend

Can I just ask a question please? We have a house that we have owned since 1976 and lived in from 1976-2004 as our principal residence. We then moved abroad and now our son lives in it although the house is still in our names.

If we sell it, will we be liable for CGT (seeing as it was our main home for all those years)? As you can imagine, the value of the property has gone up slightly since 1976!

Bex300606

Where an individual sells their Principal Private Residence (PPR) ie. their only or main residence, they are exempt from Capital Gains tax. From the information you've given it would appear that the proportion of the gain arising between 1976 and 2004 will be exempt.

The rules of the exemption state that where a property has been an individual's PPR at some point during the period of ownership, the last three years will automatically qualify for the PPR relief. Therefore, should you sell the property by 2007 you should not be liable to CGT.

Should you sell the property after that date then an amount equivalent to the proportion of gain which arises when the property is not covered by PPR relief may become chargeable to tax.

Any amount which falls to be taxed will be reduced by non business asset taper relief (the amount of which is dependent on the length of ownership, in your case this should be 40% of the taxable gain) and your annual exempt amount (£8,800 in 2006/07), if available. Any tax then due will be calculated with reference to your marginal rate of tax.

I hope this answers your question.

Cook_County

The way that your question is phrased and the answer given above illustrate the dangers of relying on information in an open forum.

Other posts by you suggest that you live in Spain. Therefore you are presumably already resident in Spain. Consequently you are presumably declaring your UK property for Spanish wealth tax each year. The gain on your UK property will similarly be taxable in Spain.

If you are non-UK resident and remain non-UK resident for 5 complete UK tax years then you will be exempt from UK tax on capital gains (irrespective of main residence relief, taper relief, UK annual CGT exemptions etc).

What I do not know is your UK residence status? Are you non-UK resident for UK tax purposes?

Do not forget that you both remain subject to UK inheritance tax on worldwide assets on death, and you also need to consider Spanish tax on death and Spanish forced heirship rules in designing your Wills.

seven-day-weekend

My husband has a letter from the Inland Revenue that says that if he is still resident in Spain after August 2007, he will be classed as non-resident fot tax purposes. I do not have any income at all apart from about £1000 a year .which I have told the Inland Revenue about and they just said OK, we won't send you any tax returns.

What 'wealth' wpould we have to declare in Spain? We are retired and live on my husband's teacher's pension which (according to the Inland Revenue) is only taxable in the UK. We earn no money in Spain.

We have had Spanish and English wills professionally drawn up.

seven-day-weekend

Also, I didn't make it clear in my original post...IF we were to sell the property , it wouldn't be until we were once more resident in the UK. We don't intend to stay in Spain for the rest of our lives (Other than due to unforseen circumstances). At the moment we are Spanish Residents. We'll probably become UK residents again around 2009.

Even taking both properties and our savings into consideration, we are at the moment under the limit for UK inheritance tax. We understand that if we sell the Spanish property we will have to pay CGT on it in Spain.