Selling my property abroad and capital gains tax

Cook_County

You might want to look at the 2012 Finance Act here:

http://www.legislation.gov.uk/ukpga/2012/14/part/1/chapter/4/enacted

gowgowuk

Hello,
I am in a similar situation and very confused too. I am Belgian and a ordinary resident in UK and I am selling a flat in Belgium. Because it has been bought 16 years ago, the gain on paper is quite big, although I am selling quite below market price and taking into account inflation over such a long time, I don't think we've made that much gain! Also, In Belgium, there is no capital gain tax on property, but there is an (relatively hefty) annual tax on owning a property that we paid for the last 16 years... My mother was living in the flat and the only reason I was made owner all these years ago was to avoid inheritance tax (since there are no gift tax in Belgium). Recently, my mother went to live elsewhere and we are selling the flat and my parents are giving me the money from the sale. But now, if I understand, I find that I need to pay tax after all....
One question: is it not possible to consider this as gift money from abroad (which is what it truly is?). I'm really not quite sure what to do..
Thanks

PS: I am reading the UK-Belgium double taxation convention and it says:"Capital gains
(1) Gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 of this Convention and situated in the other Contracting State may be taxed in that other State."
In that case "that other State" refers to Belgium, so, I won't have to pay tax in UK?

Cook_County

Since when did "may" mean "shall"?

Presumably you could claim the remittance basis and pay the £30,000 or £50,000 charge if this was less than the CGT?

gowgowuk

Cook_County wrote: »

Since when did "may" mean "shall"?

yes, sorry, English not being my mother tongue, I find these legal texts very difficult to understand. That's why I am asking for help here after all!

Cook_County wrote: »

Presumably you could claim the remittance basis and pay the £30,000 or £50,000 charge if this was less than the CGT?

Thanks for the info, but I *think* (again, if I understand properly), following their qualifiers, that I am either a UK ordinary resident or domiciled and therefore don't qualify. In any case, the amount is going to be less than £30000 (might not be a lot of money for you, but it is for me!).

I guess I should go and talk to a Tax advisor asap...
I'm still not sure about this Money gift approach.... What if my parents decide to transfer the money from their account to mine as a monetary gift? After all, that was the original idea. I didn't make any money of any sort with the flat myself...

00ec25

gowgowuk wrote: »

Hello,
Because it has been bought 16 years ago,

My mother was living in the flat and the only reason I was made owner all these years ago

One question: is it not possible to consider this as gift money from abroad (which is what it truly is?).

please explain who owns it and what share each person has: you (100%?) or you plus mother and father, so 33% each?

did you become an owner 16 years ago or was it more recent than that?

if one or both of your parents are still (part) owners then they can gift their share of the sale.

But if only you is the owner, then no the money cannot be gifted to you since it is already your money from selling your property

gowgowuk

Unfortunately, I am the owner. The flat was given to me by my parents 16 years ago, although in practice it was my mother's flat. This was all done at the time to avoid future inheritance taxes in Belgium (nothing illegal) and I didn't know then that I would go and live in UK! Of course retrospectively, if I knew I would have the problem I have now, my parents could have kept the flat under their name, sell it now and give me the sale money with no extra tax to pay :-( Same thing if I was still living in Belgium.
In Belgium, instead of paying a capital gain tax on property, we pay each year "tax on property ownership". We have paid this for 16 years, only to find now that we have to pay extra... Do you think that I could somehow deduce this from the UK tax? (although technically speaking, it's not a capital gain tax). I was making plans to use this to buy my own home in UK, but I think I'll have to delay things now...

Also, my ranting is because I realize that the UK tax is based on a supposed gain which does not take into account inflation and use the Belgian francs/GBP exchange rate of the time (edit: actually this seems to go slightly in my favour at the moment), so, on paper in 16 years, it looks like I made a huge profit which in reality is not true. Thanks god my parents didn't give a house when I was much younger!

All looking like bad news to me.....

Cook_County

This is your flat. You are liable for CGT on the gain over 16 years converting the cost on the date it was gifted to you and the proceeds on the date received. Unless you wish to claim the remittance basis you are liable to UK CGT on the sterling gain, less your annual CGT exemption. These are the rules.

jimmo

It does seem very likely that you are going to have to face a UK tax bill for your capital gain on the Belgian flat but I think you will need to focus your mind on what may be possible.

UK Capital Gains Tax used to allow for inflation but it doesn’t any more. Apart from having a rant on a forum, there is nothing you can do about that. Put to one side and move on.

As you are intending to bring the proceeds of sale of the flat to the UK domicile is not really an issue. The arising basis (date of sale of the flat) and the remittance basis (date that the sale proceeds are received in the UK) are, for you, more or less the same thing. Put it aside and move on.

Here in the UK there are significant differences between legal ownership and beneficial ownership.

http://www.hmrc.gov.uk/manuals/cgmanual/CG70230.htm

Whether Belgian law on property ownership has a comparable concept I do not know but if the flat was in the UK there would be some possibility that you could argue that, when the flat was put into your name, you became the legal owner as bare trustee of the beneficial owners.

http://www.hmrc.gov.uk/manuals/cgmanual/CG34302.htm

In that case the capital gain would not be yours.

Alternatively there is some possibility that the arrangements put in place that your mother would live in the flat constitute an express (written) or implied trust. In which case you may be able to claim exemption from capital gains tax on the basis that the flat is settled property occupied, as her only or main residence, by a beneficiary of the trust.

http://www.hmrc.gov.uk/manuals/cgmanual/CG65400+.htm

　

If the flat was in the UK I would suggest that you use what you have learned here to guide you in choosing an appropriate tax advisor and solicitor. As the flat is in Belgium you almost certainly need an advisor who has experience of both countries.

On the other hand, you may need to consider whether paying the UK capital gains tax may be cheaper than paying professionals.

gowgowuk

Thanks to the replies. Yes it does look quite complicated, but at least I got some directions for a discussion with an advisor. The other aspect that I now think might be worth exploring is the fact that for 16 years we paid the Belgian tax on property (which is put in place instead of capital gain tax). It does represent a substantial amount of tax and with the double taxation convention, I hope I can argue that this at least reduced the gain we've made.

Cook_County

If you'd like to argue this point before the First Tier Tribunal I'd be interested. HMRC would not accept a property or wealth tax as a tax on capital gains.