Capital gains tax on overseas property sale

stormyfireball

My husband is Polish, but has lived and worked in the UK for approx 17 years. He has recently sold some land in Poland which he has owned in Poland for approx 30years. He was given the land. The land was just an old field - it never generated any income during that time. Does anyone know tax implications for bringing the money from the sale to the UK, as it seems we are looking at a huge tax bill (capital gains etc) which seems very unfair and costly

Jeremy535897

If your husband has been resident in the UK for that long, that means he is deemed domiciled here, and consequently he is liable to UK tax on all his worldwide income and gains, whether he remits them here or not. See condition B:
https://www.gov.uk/guidance/deemed-domicile-rules

He will need to calculate the capital gain based on the sale proceeds (sterling equivalent) less his original cost (sterling equivalent). He has an annual capital gains tax exemption of £12,300.

He will potentially also be liable for tax in Poland, as Article 13 of the UK-Poland double tax agreement provides. However, on a quick glance it may be that the gain is exempt in Poland (as your husband is presumably not resident in Poland). See:
https://property-venture.com/2-uncategorised/147-poland-property-tax-guide-overview-for-buyers-of-polish-properties.html
If he did have a Polish tax liability, it could be used to reduce the UK tax liability.

"Capital Gains tax on Polish properties

In general, there is no special tax rate for capital gains in Poland. Capital gains are usually added to the regular income of an individual/company and based on the normal tax rates.

Despite this, if property in Poland (or real estate) is sold more than 5 years after it was purchased the capital gain is exempt from tax."

stormyfireball

Thanks for this. The problem is he didn't buy the property (its land actually which has just remained as it is for the time he has had it), he hasnt made a single penny from it during that time, and doesn't know what its value was when he was given it.

Jeremy535897

The land's base cost is its market value at the date he acquired it (I am assuming that was after 31 March 1982).

Looking at this paper, you could perhaps assume a value at acquisition of one tenth of its sale price (assuming the sale price does not reflect any change of use or development value). You would disclose the basis of your assumption on the tax return. 

https://www.researchgate.net/publication/330169191_Price_volatility_of_agricultural_land_in_Poland_in_the_context_of_the_European_Union

macman

stormyfireball said:

Thanks for this. The problem is he didn't buy the property (its land actually which has just remained as it is for the time he has had it), he hasnt made a single penny from it during that time, and doesn't know what its value was when he was given it.

That may be the case, but it's not relevant to the question of of CGT. He clearly has made a capital gain on it.
If he had made income from it (rental of the land) then that would form part of his income tax return each year.