Living abroad, selling a flat in a bit. Pitfalls??

paddykop

I purchase a property on the right to buy scheme in the '90s and lived there for several years. In 2000, I went and worked aboroad for a couple of years, coming back long enough to complete my immigration papers for Canada, where I now live. In 2000-2002, the flat was let out through an estate agent and is now let to a housing association. I have paid UK tax as a non-resident with property rental income.

I remortgaged on a short term variable rate mortgage which expires in July 2006, at which time I would like to sell the property and buy something here in Canada. Based on current valuations, I would have approx 200k after repaying the mortgage.

How can I minimise the cost implications to myself in selling the property and transferring the money out of England to buy my new house? If necessary, I can return to the UK for a while.  

Thank you,

Paddy :-/

gus

Nice little earner

Broadly:

Your gain will be time apportioned between the times you were living there and not. The period you went abroad will be deemed as residency if you lived in the house on your return to the UK. Also the last 3 years will be deemed as residency automatically.

e.g. you bought house in 96 and sell in 06, from what you've said 1/20 of the gain will be subject to tax. There will also be indexation allowance, taper relief and letting relief available so the gain may be much smaller than you think, may even be nil

It will be well worth crunching the exact figures and working out all your reliefs available so you can budget for any tax. The gain will be reportable on a UK tax return so you will need to let the revenue know once property is sold.

You may also want to check the Canadian tax position on the property sale.

You mentioned that you pay tax on your rental income. If you have no other UK income you may be able to claim some of this tax back.

newkiwi

Just on the bit about paying tax on your UK income, we're living abroad & renting out UK property at the moment too.

Our accountant initially didn't give my husband the normal UK personal allowance because they misunderstood the non-residency rules. When I queried this they discovered that apparently any UK citizen has the right to the UK personal allowance whether or not they are UK resident.

So make sure you're still getting your personal allowance to reduce/zero your tax payable!  :)

Of course, we're going to have to pay the NZ govt 33% of profit anyway, because they tax all world-wide income themselves (taking account of what tax has already been paid to the UK govt).  :( But at least they won't want any CGT, so we just have to work out how long we have to stay here before we sell anything in the UK - found some rules on the UK IRD website somewhere which seemed to say that a certain 4 out of this 7 years had to be spent outside the country, but they weren't consecutive & it was all very unintuitive. Check out the site, it's on there somewhere in the non-residents section (or possibly CGT).