CGT due if owner non resident?

[Nora Kay]

My daughter is a British citizen who has been living abroad for 6 years. She is considered Not Resident and Not Ordinarily Resident by HMRC. She owns a house in the UK which she now wants to sell. The house has been tenanted during her absence, but as she has a large mortgage the net assessable rents fall below her Personal Allowance and she pays no UK tax. (She has no other income in the UK).
My question is, will the capital gain arising on the sale be subject to UK tax? I have heard, some years ago, that non residents escape this tax. Is this still correct, or has the law changed?
Also, will there be any difficulty in transferring the anticipated net gain of approx. £100,000 out of this country to the USA? Can I assume that documents supporting her sale of the property would counteract any suspicion of money laundering?
Any advice would be much appreciated.
Nora

[Tax Accountant]

My daughter is a British citizen who has been living abroad for 6 years. She is considered Not Resident and Not Ordinarily Resident by HMRC. She owns a house in the UK which she now wants to sell. The house has been tenanted during her absence, but as she has a large mortgage the net assessable rents fall below her Personal Allowance and she pays no UK tax. (She has no other income in the UK).
My question is, will the capital gain arising on the sale be subject to UK tax? I have heard, some years ago, that non residents escape this tax. Is this still correct, or has the law changed?
Also, will there be any difficulty in transferring the anticipated net gain of approx. £100,000 out of this country to the USA? Can I assume that documents supporting her sale of the property would counteract any suspicion of money laundering?
Any advice would be much appreciated.
Nora

(1) Provided she does not return to the UK until after the tax year of sale, she will not pay any UK CGT. But she must check her exposure, if any, to the country where she is resident during the year of sale.

(2) There are no exchange control restrictions in the UK. Therefore, there is no reason why she cannot transfer the monies to anywhere in the world. In your daughter's case, there does not appear to be any problems in being able to demonstarte the origin of the source of funds being transferred abroad.

Ramnik

[Nora Kay]

Ramnik
Many thanks for your reply.
My daughter will be visiting the UK from 14th March to 11th April 07 in order to instruct an estate agent re the sale of her house, and sort out the tenancy etc. The house will most likely be sold during the tax year ending 5/4/08 some time after her return to the USA. You advised that she should not return to UK until after the end of the tax year of sale, so will her visit mean that CGT will be payable?
Her proposed length of stay in 2007/2008 (6 days) will not make her Resident for the coming tax year.

[Paragon]

If she has a Green Card, be cautious!

[Tax Accountant]

Ramnik
Many thanks for your reply.
My daughter will be visiting the UK from 14th March to 11th April 07 in order to instruct an estate agent re the sale of her house, and sort out the tenancy etc. The house will most likely be sold during the tax year ending 5/4/08 some time after her return to the USA. You advised that she should not return to UK until after the end of the tax year of sale, so will her visit mean that CGT will be payable?
Her proposed length of stay in 2007/2008 (6 days) will not make her Resident for the coming tax year.

I should have said that she should not become resident of the UK. Visits within the permitted lengths are OK.

But do check the USA tax position.

Ramnik

[Nora Kay]

Ramnik,
Thank you for this clarification.
I shall ensure she checks the USA tax position.
Thanks once again,
Nora

________________________________________________


Paragon,
Can you tell me how you think this would affect her GreenCard?
Thank you,
Nora

[Paragon]

Ramnik,
Thank you for this clarification.
I shall ensure she checks the USA tax position.
Thanks once again,
Nora

________________________________________________


Paragon,
Can you tell me how you think this would affect her GreenCard?
Thank you,
Nora

Sorry, won't affect the Green Card, but being a resident of the USA, you need to check the tax position.

[Nora Kay]

Paragon,
OK.
Ta.
Nora

[Tax Accountant]

Ramnik,
Thank you for this clarification.
I shall ensure she checks the USA tax position.
Thanks once again,
Nora

Nora, you are welcome.

Sometimes I wonder whether it is a good idea to sell an investment property which is tenanted and where there is a large mortgage for the following reasons:

(1) If it is tenanted and the property is in a resonably good tenant demand area, why rock the boat and why not let the tenant continue paying your mortgage?

(2) Presence of a large mortgage means that the net amount realised may not be material in many instances. In such cases, one has ended up losing potential future gains for relatively small amount.

(3) In many cases, where money is required for other purposes, this could be achieved by remortgaging the property instead of selling it.

It goes without saying that each person has to weigh up the situation in their own particular circumstances and do what is best for them. It is just that many people end up selling properties without considering all the factors and alternatives.

Ramnik