Capital Gains Tax on sale of property abroad

nina36

I would be grateful for any feedback on the following:  I and my two adult children are UK residents and own a property in Italy we want to sell. We did not buy this property but inherited it from my father. We have received an offer equivalent to about £365,000.

We have agreed that the funds will go to me as I have no savings, no property in the UK (I rent a small flat) or income except for pension credit and attendance allowance. The property in Italy was not rented out and therefore generated no income. I was not able to live there myself as I depend on one of my children in the UK for care.  My children are self-employed UK tax payers, currently not earning because of COVID, in receipt of SEISS grants. One has a low income and no property (and is also my live-in carer), the other earns more and owns a property, but as I said the plan was for the proceeds of this sale to go to me towards buying a property in the UK.

Will I need to pay Capital Gains tax and if so roughly how much? I have already found out that CGT are not due in Italy as the house was inherited and has been in the same ownership for over 5 years.

Many thanks

[Deleted User]

On the face of it all three of you will be liable to CGT, each on your third share of the difference between the sale price and the value at the time of your father’s death. You can deduct the costs of sale.

The fact that only you receive the proceeds is irrelevant - the property is in three joint names.

Keep_pedalling

[Deleted User] said:

On the face of it all three of you will be liable to CGT, each on your third share of the difference between the sale price and the value at the time of your father’s death. You can deduct the costs of sale.

The fact that only you receive the proceeds is irrelevant - the property is in three joint names.

You also have an annual CG allowance of £12,300 so unless the value has increased by more than £36,900 there will be no tax to pay, assuming you have no other taxable gains to take into account.

[Deleted User]

Keep_pedalling said:

[Deleted User] said:

On the face of it all three of you will be liable to CGT, each on your third share of the difference between the sale price and the value at the time of your father’s death. You can deduct the costs of sale.

The fact that only you receive the proceeds is irrelevant - the property is in three joint names.

You also have an annual CG allowance of £12,300 so unless the value has increased by more than £36,900 there will be no tax to pay, assuming you have no other taxable gains to take into account.

I thought exactly the same but then remembered that £1 was equal to €1.30 odd five years ago!

nina36

Thanks to you both for your replies. I take the point about all three being liable for CGT. You point out that the tax due would be the difference between the sale price now and the value at the time of my father's death. I should have specified that he signed over the property to us just after the sale so perhaps one would need to calculate the difference in value between that point and now rather than between his death and now (bearing in mind that purchase and succession happened pre-euro so I'm not sure how one would establish an equivalence)? The difference would be more than £36,000 so how might I calculate it?

Thanks again

[Deleted User]

I am not sure what you mean by ‘signed over the property to us just after the sale’, Surely, if it was sold, there was no longer any property to transfer? Do you mean that he transferred the property shortly after he purchased it?

Sorry - need some clarification.

Jeremy535897

that he signed over the property to us just after the sale

What sale? You are right to assume that the base cost is the sterling equivalent of the lira value at the date you and your children acquired your shares in it. The sale proceeds will be the sterling equivalent of the euro sale price. The monthly rate should do. See https://www.gov.uk/government/collections/exchange-rates-for-customs-and-vat

laticsforlife

I think the father bought the property some years ago (in Lira) and then transferred (aka sold) it to the 3 persons as above.

Therefore we should know the Lira amount he bought it for, and can covert that using historical rates into GBP, and that's your base price.  Obviously your sale price is your sale price (less costs), and the CGT is due on the difference of these 2 sets of sums, split 3 ways, and each person knocks off the AEA of £12, 300 (or wait until April 6th it may go up, although what with Covid costs, the Budget might half it!).

nina36

Thanks again. That's correct latics, it was bought for 94 million lira in '94 which according to the historic conversion site inflationhistory dot com is about €75,208 euro or £65,000 (there were also notary fees on top of that though I don't know how much they were). Plus extension costs about 9,000, plus agency commission now about 3%. So I assume I'd deduct all these as well as the CGT allowance for three of us, £36,900, and calculate 18% of the remainder.

Jeremy535897

nina36 said:

Thanks again. That's correct latics, it was bought for 94 million lira in '94 which according to the historic conversion site inflationhistory dot com is about €75,208 euro or £65,000 (there were also notary fees on top of that though I don't know how much they were). Plus extension costs about 9,000, plus agency commission now about 3%. So I assume I'd deduct all these as well as the CGT allowance for three of us, £36,900, and calculate 18% of the remainder.

The gain is going to be well over the basic rate band, so even if all three of you had no income or gains at all apart from the sale of this property, some of the gain will be taxed at 28%. See
https://www.gov.uk/capital-gains-tax/rates

nina36

Unfortunately I can't make head or tail out of the information in the link in terms of how much would be taxed at 18% and how much at 28%.