Capital gains tax on selling UK house after move to Canada

jem16

Spidernick wrote: »

Basically CGT will be payable on residential property for non-UK tax residents for sales after 5 April 2015. As your son sold his property in the 14/15 tax year then no CGT will apply as long as he doesn't return permanently to the UK before the five years are up. There is nothing to report on the 14/15 UK tax return in terms of this sale (nor for future years if he doesn't come back).

Ok - thanks.

Although it's obviously not necessary is it worth entering it as it will be a CGT loss or is it not worth the bother?

On the rental pages of the 14/15 UK tax return your son should tick the box to say that UK rental income has ceased in that year. He will presumably then have no taxable income in the UK.

He still has a UK bank account that pays some interest as it's been useful up till now. Not sure if he will continue with that.

HMRC should realise that no tax returns should be sent to him for completion going forward, but it sometimes takes a couple of years before they twig this. If returns are issued they need to be completed, even if it just means a nil tax return, otherwise fines will be levied if not completed on time.

Noted - thanks.

My recommendation would be for your son to get the 14/15 return filed as soon as possible after 5 April and then write to HMRC a few weeks later confirming that he will have no UK-taxable income going forward and could they please therefore close down his Self Assessment record and not issue returns for 15/16 onwards.

I shall let him know.

Thanks for your help with this.

Spidernick

My pleasure.

From memory I'm not sure to what extent you can create a loss in terms of letting relief, etc. I've got a feeling that you cannot create a loss in these circumstances, but may be wrong. Even if you can, I don't think it's worth it as the loss would only be carried forward and never used from what you are saying.

The UK/Canada tax treaty seems to be fairly standard in that interest is taxed where the individual is tax resident, irrespective of where it arises. As such, UK bank interest should only be taxable in Canada and KPMG should have treaty exempted this on the UK tax returns for the non-resident periods (unless the interest plus rental profit was under the personal allowance and thus made no odds to the net tax position).

jimmo

Capital Gains losses realised by non-residents cannot be claimed.
http://www.hmrc.gov.uk/manuals/cgmanual/CG15820.htm
Whilst it doesn’t really matter in this case there is a similar provision to limit what, if any, losses can be claimed when any corresponding gain would have been relieved under PRR.
If he was resident in the UK, your son would be able to claim any loss attributable to lettings relief.
http://www.hmrc.gov.uk/manuals/cgmanual/CG65080.htm
With regard to his UK Return, if memory serves me correctly, he will be required to declare the gain or loss and show it as exempt because the proceeds of sale will exceed 4 times the annual exempt amount but the precise wording is included in the notes for completion.

jem16

jimmo wrote: »

With regard to his UK Return, if memory serves me correctly, he will be required to declare the gain or loss and show it as exempt because the proceeds of sale will exceed 4 times the annual exempt amount but the precise wording is included in the notes for completion.

Ok this is getting confusing to be honest as you're all saying different things.

Proceeds of sale - what exactly is included in that? Is it purely actual sale price or is it sale price minus fees and repayment of outstanding mortgage?

jem16

Spidernick wrote: »

My pleasure.

From memory I'm not sure to what extent you can create a loss in terms of letting relief, etc. I've got a feeling that you cannot create a loss in these circumstances, but may be wrong. Even if you can, I don't think it's worth it as the loss would only be carried forward and never used from what you are saying.

No I can't see it ever being carried forward.

The UK/Canada tax treaty seems to be fairly standard in that interest is taxed where the individual is tax resident, irrespective of where it arises. As such, UK bank interest should only be taxable in Canada and KPMG should have treaty exempted this on the UK tax returns for the non-resident periods (unless the interest plus rental profit was under the personal allowance and thus made no odds to the net tax position).

I would be pretty sure that any rental profit and interest would be under the personal allowance so no tax due. Interest of course would already be taxed at source by the bank so perhaps a refund was given. I think I need to get a closer look at his tax returns for the last two years to see how this has been handled by KPMG.

Spidernick

jimmo wrote: »

With regard to his UK Return, if memory serves me correctly, he will be required to declare the gain or loss and show it as exempt because the proceeds of sale will exceed 4 times the annual exempt amount but the precise wording is included in the notes for completion.

No declaration is necessary, due to non-residence. It doesn't matter how much the proceeds are. Sorry, but you are confusing matters unnecessarily.

jem16

Spidernick wrote: »

No declaration is necessary, due to non-residence. It doesn't matter how much the proceeds are. Sorry, but you are confusing matters unnecessarily.

Thanks Spidernick. I have had a good rummage around HMRC's website today and can see you are perfectly correct - no need for declaring CGT. Looking at the relevant pages I think we're just as well not declaring it - no need to give ourselves problems to be honest.

I've also now seen the last 2 tax returns that KPMG did for him. The first (2012/13) looked quite involved as it was a split year and they did indeed invoke the Double Tax Treaty for his UK interest. It also gives us a clear idea how to complete the rental income section of the return. I'm glad that this one was done by KPMG as it looked more complicated. He had a refund due of around £500.

The 2nd one (2013/14) appeared to be more straightforward as it just included rental income and interest. Some losses on the rental income for 2012/13 were able to be carried forward and there's still some remaining to use for 2014/15 so that was useful to see. As total income was less than the UK personal allowance there was no need to use the Tax Treaty and again a refund was due.

I haven't seen the rental figures yet for 2014/15 but I suspect, along with the remaining loss to carry forward, that it will be less then the personal allowance again. Should make completing it fairly straightforward - hopefully!

One thing we have noticed is that he's not able to file online just using HMRC's own online gateway. I think this is because the non-residency pages are not available - do you know if that's correct?

If so it looks like a paper return unless there is some inexpensive software that can be used.

Still not sure what to suggest to him for future SA returns with the very small amount of interest due. He obviously cannot say that he has no UK income as obviously he will have.

Thank you once again for your help - it's clarified a good few things so we feel confident enough in handling this.

Spidernick

I think there is something unusual with the Government Gateway and using that directly which means that returns with non-residency pages cannot be filed on-line (which is a little ironic, as if you live thousands of miles away that's when you'd much prefer to file on-line!). I expect the returns prepared by KPMG were filed on-line showing non-residence pages using their software.

jem16

Spidernick wrote: »

I think there is something unusual with the Government Gateway and using that directly which means that returns with non-residency pages cannot be filed on-line (which is a little ironic, as if you live thousands of miles away that's when you'd much prefer to file on-line!).

Yes it does seem rather silly to be honest.

I expect the returns prepared by KPMG were filed on-line showing non-residence pages using their software.

I expect that is what would happen too. KPMG is named as his agent - I think we need to let HMRC know that this is not the case now?

Spidernick

Yes, assuming KPMG will not be doing anything going forward then it would pay to advise HMRC.