CGT foreign property loss offset

edgarina

Hi,

My parents are trying to sell a property in France that has been a money pit and their losses will be around 30k

They also have a rental property in the UK to sell the purpose of selling both is to pay the mortgage on their home and its a close call.

The UK prpoerty will make a gain of around 50k less both their allowances makes 30k which equals the loss in france.

Is it correct that if sold in the same tax year the foreign loss can be used to offset the gain against the UK sale e.g. no tax to pay. I thought this was the case but my parents partner in the french property doesn't seem to think so.

jimmo

Assuming your parents are both resident and domiciled in the UK, you are correct.
The basic principles are that:
1) A person who is both resident and domiciled in the UK is assessable on his worldwide capital gains.
2) If a capital loss arises in circumstances such that if a gain had arisen, it would have been assessable, the loss is allowable.
If they are not resident and domiciled in the UK it gets a lot more complicated.
http://www.hmrc.gov.uk/manuals/cgmanual/CG10921.htm
If the plan is to clear everything up in one go they can happily sell both properties in the same tax year and achieve the required result.
However, if they have other capital assets to be sold later it would probably be better tax planning to sell the loss making asset in one year and sell the gain making asset the following year.
Do you need to go there?

edgarina

Thanks Jimmo,

Yup both resident and domiciled in the UK and no, unfortunately, no other assets. Looks as if the tax might be simplish to sort, selling a rural partly renovated property in france is quite another thing, oh well.

Thanks again.