Capital Gains Tax Questions

JBTISH

Monday 21st March 2022

Good afternoon.

I have a few questions relating to a Capital Gains Tax calculation if there is an experienced person who could help. I am trying to get an idea of how much a disabled individual on benefits would have to pay if they were to sell their one third share of a home in France. I have used the UK Governments website to calculate the CGT that may need to be paid but I am not sure how some variables should be entered because of time and £/€ conversion factors. I would really appreciate the advice of an experienced tax person to help me make the calculation if possible.Thank you in advance. 

1. Does the HMRC person calculating the CGT use (i) both the 2005 £/€ value of the property on inheritance and the current 2022 £/€ value of the property in the calculation or (ii) only the difference in the euro value of the property between Inheritance value and Sale value in euros and only convert this one figure to pounds? Hope that made sense. The difference in these two figures causes a large change in the CGT calculation.

2. When stating a persons annual income for the purpose of the CGT calculation, if they are on state benefits should I include their annual Housing & Council Tax benefits? I understand their State Pension, Pension Credit and PIP benefit should be included as annual income, as it is paid directly into their bank accounts. However their housing benefit and council tax benefit is paid directly to their landlord and voided respectively. Should I include or not include these two benefits as annual income?

3. When answering the question: “What is your ‘Taxable’ Annual Income’? do I just put the figures for State Pension, PIP etc as they are seen? Obviously most peoples pay slips have Taxable allowance, Gross and Net incomes shown but for someone on a state benefit, they only see one figure and no deductions. Is there anything I should consider here or anything I need to do in relation to Capital Gains Tax? ie If £100 PIP is paid into a persons bank, has that figure been taxed already (somewhere) or it has not been taxed or it makes no difference?

4. Can you offer any thoughts and advice about the current state of the UK France Double Taxation agreement? Is it still in place post Brexit in March 2022? Is he ‘hidden’ local tariff with the French CGT still not deductible from UK CGT.

5. I don’t understand the question: “Are you claiming any Capital Gains Tax Losses for before the years 2021/22? 

If anyone experienced is able to help it would be much appreciated.

Thank you in advance.

[Deleted User]

I will say at the outset that, given your questions, I would not be confident that you should be undertaking the completion of the return without professional advice - not for the amateur!  You must know what constitutes income for tax purposes before you start and, with respect, you don’t.

1) your first suggestion is correct - the Euro conversion at both inheritance and sale dates are used.

2) Housing and Council tax benefits are not taxable income - should not be included.

3) PIP is not a taxable benefit and should never be declared as income.

4) Brexit has changed nothing in this regard.

5) If you have not previously made a disposal for Capital Gains purposes you can ignore this question or say ‘No’

I would strongly recommend that you seek professional advice. While there is a cost, it will provide reassurance that it has been correctly declared with the correct tax due thereon.

Jeremy535897

I agree. You seem to have a grasp of some of the more awkward French technical issues. The UK-France DTA allows the UK government and the French government to tax the gain, with the UK government giving credit for the French tax paid. The definition of French tax does not include their social charge. See https://www.charleshamer.co.uk/french-capital-gains-tax-technical-notes.aspx

billy2shots

Can I pick up on the other angle. 

What disability are we talking about?
Presumably not (or not only) physical as that shouldn't affect things. Or was the disability mentioned solely to explain benefits?

Has the person got a disability that affects their mental capacity because if so that could complicate matters far more than tax matters. 

JBTISH

billy2shots said:

Can I pick up on the other angle. 

What disability are we talking about?
Presumably not (or not only) physical as that shouldn't affect things. Or was the disability mentioned solely to explain benefits?

Has the person got a disability that affects their mental capacity because if so that could complicate matters far more than tax matters. 

Hi Good afternoon billy2shots

The disability was mentioned to help anyone answering get a slightly broader picture but they have both physical and mental disabilities. 

Could you help me understand how a mental disability would complicate matters far more? They have their full mental wits about them just a history of poor mental health. They don’t suffer from an inability to make their own decisions but cannot see a broader picture or minute detail at times. Hence my assistance. 

JBTISH

[Deleted User] said:

I will say at the outset that, given your questions, I would not be confident that you should be undertaking the completion of the return without professional advice - not for the amateur!  You must know what constitutes income for tax purposes before you start and, with respect, you don’t.

1) your first suggestion is correct - the Euro conversion at both inheritance and sale dates are used.

2) Housing and Council tax benefits are not taxable income - should not be included.

3) PIP is not a taxable benefit and should never be declared as income.

4) Brexit has changed nothing in this regard.

5) If you have not previously made a disposal for Capital Gains purposes you can ignore this question or say ‘No’

I would strongly recommend that you seek professional advice. While there is a cost, it will provide reassurance that it has been correctly declared with the correct tax due thereon.

Good afternoon purdyoaten2

Thank you for the reply. I just needed clarification. 

billy2shots

JBTISH said:

billy2shots said:

Can I pick up on the other angle. 

What disability are we talking about?
Presumably not (or not only) physical as that shouldn't affect things. Or was the disability mentioned solely to explain benefits?

Has the person got a disability that affects their mental capacity because if so that could complicate matters far more than tax matters. 

Hi Good afternoon billy2shots

The disability was mentioned to help anyone answering get a slightly broader picture but they have both physical and mental disabilities. 

Could you help me understand how a mental disability would complicate matters far more? They have their full mental wits about them just a history of poor mental health. They don’t suffer from an inability to make their own decisions but cannot see a broader picture or minute detail at times. Hence my assistance. 

So, mental capacity is based on a decision by decision basis. Just because someone has capacity to make a decision on something doesn't automatically mean they can decide to sell 1/3 of a property because the 'broader picture' and 'minute details' can be very important. 

Are there professionals involved with the disabled person, a social worker, nurse, psychologist or psychiatrist?

This will need to be squeeky clean to avoid any potential risk of accusations of financial abuse etc. The other 2/3 owner(s) rightly or wrongly could be seen to be benefitting from a sale. 

A mental capacity assessment and decision might need to be conducted. If it is deemed that the person does lack the capacity then a 'best interest' decision will need to be made. 

This is of course unless someone currently is the disabled persons court appointed deputy for property and affairs. In which case the decision can be made on their behalf with their best interest at heart. 

JBTISH

billy2shots said:

JBTISH said:

billy2shots said:

Can I pick up on the other angle. 

What disability are we talking about?
Presumably not (or not only) physical as that shouldn't affect things. Or was the disability mentioned solely to explain benefits?

Has the person got a disability that affects their mental capacity because if so that could complicate matters far more than tax matters. 

Hi Good afternoon billy2shots

The disability was mentioned to help anyone answering get a slightly broader picture but they have both physical and mental disabilities. 

Could you help me understand how a mental disability would complicate matters far more? They have their full mental wits about them just a history of poor mental health. They don’t suffer from an inability to make their own decisions but cannot see a broader picture or minute detail at times. Hence my assistance. 

So, mental capacity is based on a decision by decision basis. Just because someone has capacity to make a decision on something doesn't automatically mean they can decide to sell 1/3 of a property because the 'broader picture' and 'minute details' can be very important. 

Are there professionals involved with the disabled person, a social worker, nurse, psychologist or psychiatrist?

This will need to be squeeky clean to avoid any potential risk of accusations of financial abuse etc. The other 2/3 owner(s) rightly or wrongly could be seen to be benefitting from a sale. 

A mental capacity assessment and decision might need to be conducted. If it is deemed that the person does lack the capacity then a 'best interest' decision will need to be made. 

This is of course unless someone currently is the disabled persons court appointed deputy for property and affairs. In which case the decision can be made on their behalf with their best interest at heart. 

Hi Good morning.  Yes I see where you are coming from. In this case this does not apply but well worth pointing out. I did think from your previous post that you me at the actual ‘tax’ form application may be different because of mental capacity as contrasted with the ‘legality’ point of view. Thank you for your advice.

JBTISH

[Deleted User] said:

2) Housing and Council tax benefits are not taxable income - should not be included.

3) PIP is not a taxable benefit and should never be declared as income.

Good Morning purdyoaten2

May ask you a question purely to help me understand why something is seen the way it is, as opposed to questioning your knowledge or experience or for purposes of doubt that you are correct.

I have quite often read that certain benefits (as you have correctly pointed out with PIP) are not considered ‘income’. However when reading these statements there is rarely an explanation why one group of money going into a bank account on a regular basis is defined as income and another group of money paid into the same bank account with the same regularity, not income. Again I am not questioning you or complaining in any way but I am curious to understand… “Why an employee of HMRC making a tax calculation would not consider PIP as an income?” Is the a simple explanation?

Thank you for your previous accurate and to the point answers which were of great value and help.

[Deleted User]

I suppose it would be hard to argue that they are all income. The question is whether they are regarded as taxable income - see below of a list of taxable and non-taxable benefits:

https://www.gov.uk/income-tax/taxfree-and-taxable-state-benefits

JBTISH

[Deleted User] said:

I suppose it would be hard to argue that they are all income. The question is whether they are regarded as taxable income - see below of a list of taxable and non-taxable benefits:

https://www.gov.uk/income-tax/taxfree-and-taxable-state-benefits

Good afternoon

Thank you, that list is very useful.  I read through the list and to my surprise, Pension Credit is on the ‘Non Taxable’ list.

Can I ask, when asked “What is you Annual Income?” for the purpose of filling an HMRC Tax questionnaire, if you are in receipt of State Pension, Pension Credit and PIP, is State Pension the only one that should be declared as ‘annual income’? I ask for clarification as for the less well informed it would appear that one is trying to hide or not declare the total income into one’s bank account.