CGT on parents' let property?

Limeycat

Hi all, I need some help about CGT. I'm a complete tax duffer, so would be grateful for any advice (especially in words of one syllable!):D

My parents moved to Spain just over two years ago and are now legally resident over there. Up to now, they have let out their former home in the UK (which they lived in for about 12 years before leaving), but they're now trying to sell it. My dad wants to get rid, but my mum's wavering and so far they've had only two viewings in nearly 2 months.

That's a debate for another thread, but with regards to CGT, they originally believed that they will be liable for it if they don't sell the property within a certain period of moving out and starting to let (they thought 3 years, which is why they're selling now). However, someone else has now told them they'll be liable for CGT anyway, as it's not their main residence.

Does anyone know which is the correct situation (if either), as this might have a bearing on whether they continue to try and sell, or decide to let the property again instead.

TiA

silvercar

As it was their home, they are exempt from CGT on its sale for the time it was their home and the last three years of ownership. So sell within 3 years of moving out and there definitely shouldn't be any CGT to pay.

Additionally, there is letting relief (worth upto £40,000) for letting a property that was your home. There is non-business asset taper relief that reduces the CGT by upto 40% depending how long the property has been owned and there are CGT allowances worth £9,200 each. So they could find that it would be a good few years before they were hit with a tax bill.

Limeycat

Thanks for the info guys, although I'm still a little bit confused!

As I understand it, as they're no longer UK residents, they shouldn't be hit by CGT even if they sell the house after 3 years, but might get caught for tax in Spain instead? At the moment, they have no intention of (ever!) coming back to the UK to live, which is why they wanted to sell the house.

If they were to gift some money to myself and my sister from the proceeds of the sale, prior to transferring the money to Spain, would that be taxable? Presumably it would reduce the tax payable by mum and dad in Spain?

alan99_2

As well as advice above ,as for non residency :

To be non resident for CGT purposes in the Uk you must be non res for 5 full consecutive tax years. However you can sell your Uk asset ,while non res ,before the 5 years but must then stay non res for the rest of the 5 years to gain exemption .

As for Spanish CGT. I dont know about Spain but some countries (eg Cyprus)have a rule that any foreign (ie UK) immovable property owned at the time of moving to that country (eg Cyprus) are not charged any CGT in eg Cyprus.
The Spanish tax advisor will tell you if this is the case.