Capital Gains Tax

[sturrdave]

Sorry if this has been covered before, but I can`t find any reference to it.  I`d be grateful if anyone can throw any light on my following dilemma:

I`m hoping to purchase a French property within the next six months, and will do so using my savings.  While the property is being painted/decorated/refurbished, I will continue to live in my home in the UK.

Once the French home is ready, I will move, and will have my UK property tittivated prior to sale.

If I become officially resident in France, before the sale of my UK property, will I become liable to pay CGT on the UK sale?  If I do, which tax authority will require payment - UK or France?

Thanks in advance for any comments.

 

sturrdave

[Nick Trollope]

[quote]Sorry if this has been covered before, but I can`t find any reference to it. I`d be grateful if anyone can throw any light on my following dilemma: I`m hoping to purchase a French property within th...[/quote]

Probably not. If you are selling your primary residence (in the UK), then there is no CGT payable. Your French house only becomes your primary residence after you have sold the UK one....

The French authorities will not be interested either.

 

[adrianpmills]

My opinion differs from the previous reply.  Your UK property will cease to be your main residence once you move to France.  It becomes your secondary residence.

However, if you sell your UK house once you have moved abroad permanently (defined as more than five years) then you will have no liability to UK tax.

A capital gain potentially arises if you return to the UK within five years of leaving (ie: the Inland Revenue regards you as a temporary non-resident).  Only the gain attributable to the period when the house was a secondary residence is taxable (calculated by apportionment over your whole period of ownership).  However, the last three years of ownership are discounted from the calculation of the gain. So even if you do return to the UK within five years - as long as you sell your UK property within three years of leaving, you will still have no UK capital gain (assuming that the house has always been your main residence prior to leaving).  

Under the current tax treaty between France and the UK there is no french tax liability on the sale of a UK house (immovable property is taxed in the state in which it is located).  However, this changes once the new UK France tax treaty comes into force - which is unlikely to be before 2007.  Under the new rules a gain on the sale of a UK property will be taxable in France with credit given for tax paid in the UK.  As the latter will be nil for a permanent french resident - then there could be a hefty tax bill in France.  So selling a UK property before the new treaty is in force is advisable.

Basically, if you sell your UK house next year you should be ok.  Any longer could be costly.

 

[Deimos]

I have no idea, however, what I did might “avoid the issues”. Live in the UK until your UK house is sold, then move. Whilst you will endure having the UK pace “tarted-up” whilst living there, it does avoid potential “primary residence” issues and people always say that it is far easier to sell a house that is lived-in than one that is empty (and thus you will probably achieve a higher sale price). No idea how extensive the work you are planning to do on the UK property is and thus no idea how practical this suggestion is.

Just a thought. I was actually driving to the ferry port when my solicitor rang to say “the money has arrived”.

Ian