Tax Implications for Gifted Overseas Property

TheRevJimJones

Hello all,
Apologies if this is a little long...
My (Portuguese) family have owned a large property outside Lisbon for the past 150+ years (since it was built in fact). It has passed down the generations until about 30 years ago it was given by my grandfather to my mother and two of her sisters.
The property has never been legally split in three, but operates as three large apartments, and three smaller dwellings.
In 2012 my mother (still living today) gifted her 1/3 of the property to me. My mother is Portuguese but has been resident in the UK for almost 50 years. I am a British citizen, resident and taxpayer.
It was never my intention to sell my share, however the complexities around ownership going forward (one aunt has died, meaning that her third is now split between her husband and their three children), and the fact that the market in the area is very good mean that the possibility of selling the entire property (or, alternatively, legally dividing it) is now being investigated. The value of the property as a whole is thought to be in the region of €3million to €4million.
So, my question is, if the property were to sell for an amount in this region and I were to receive a third then what would the tax implications be in the UK? I've obviously not purchased the property myself so would I be liable for Capital Gains Tax? On what amount? The full third?
My initial plan if it does sell (and I am by no means certain that it will) would be to use somewhere in the region of €600,000 to buy another property in the area, and to use the remainder to pay off my mortgage in the UK. This would, however, only be an option if I'd have enough left after taxes for it to be viable.
I'm only after advice on the UK element of the tax. The Portuguese aspect I think I have covered!
Any advice gratefully received.

sheramber

A UK resident is liable to Capital Gains tax on the disposal of an overseas property.

https://www.gov.uk/tax-sell-property

Did you mother report a Capital Gian when she passed the property to you?

[Deleted User]

TheRevJimJones wrote: »

Hello all,
Apologies if this is a little long...
My (Portuguese) family have owned a large property outside Lisbon for the past 150+ years (since it was built in fact). It has passed down the generations until about 30 years ago it was given by my grandfather to my mother and two of her sisters.
The property has never been legally split in three, but operates as three large apartments, and three smaller dwellings.
In 2012 my mother (still living today) gifted her 1/3 of the property to me. My mother is Portuguese but has been resident in the UK for almost 50 years. I am a British citizen, resident and taxpayer.
It was never my intention to sell my share, however the complexities around ownership going forward (one aunt has died, meaning that her third is now split between her husband and their three children), and the fact that the market in the area is very good mean that the possibility of selling the entire property (or, alternatively, legally dividing it) is now being investigated. The value of the property as a whole is thought to be in the region of €3million to €4million.
So, my question is, if the property were to sell for an amount in this region and I were to receive a third then what would the tax implications be in the UK? I've obviously not purchased the property myself so would I be liable for Capital Gains Tax? On what amount? The full third?
My initial plan if it does sell (and I am by no means certain that it will) would be to use somewhere in the region of €600,000 to buy another property in the area, and to use the remainder to pay off my mortgage in the UK. This would, however, only be an option if I'd have enough left after taxes for it to be viable.
I'm only after advice on the UK element of the tax. The Portuguese aspect I think I have covered!
Any advice gratefully received.

Problems indeed!
You will be liable for Capital Gains tax on the gain made from when the third share was gifted to you in 2012 (with credit for any Portuguese tax paid). However as sheramber has pointed out, your mother should have declared the gain on the value of the gift of her one third share from when she acquired this share. The fact that it was gifted is not relevant. It still is regarded as a disposal for Capital Gains tax purposes.

TheRevJimJones

Many thanks for the replies.
So, how would the capital gain since the gifting in 2012 be calculated? Just by averaging the market in the area since that time?
Forgive me if I'm asking a daft question but if, for argument's sake, all the money received from the sale of the 1/3 was re-invested in another property then would I still be liable for CGT?
Cheers!

[Deleted User]

You need to obtain a formal independent valuation for the property in 2012 (tends to suggest that your mother did not declare the disposal or one would already be held)

The reinvestment would not affect the CGT.

Cook_County

Did your mother create an excluded property trust before the non-dom rules changed in 2008? If not, why not? Did she pay UK CGT in 2012? If not, why not? Sorry to pick holes; but if your family had professional advice all this time it sounds as if the advice may have been faulty. The collapse in Sterling against the Euro will, incidentally, increase your UK CGT when your share is sold.