CAPITAL GAINS TAX

[gail]

Hi, we have a house in the Auvergne that we are selling.  We have owned the house for two years as a holiday home, our permanent home is in Uk. My question is when it is sold will we have to pay capital gains tax in the Uk as well as in France on the profit? If so are there any reductions or will it be the standard rate as if we were selling a second home in the UK?

[Debra]

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[Baz]

[quote user="Debra"] I understand your UK CGT is paid at your highest rate of tax, whereas I used to think it was at a rate of 40% for everyone (I remember reading somewhere that this idea was wrong).   [/quote]

Debra, you are quite correct, CGT rate in the UK is charged at your highest rate of tax. So many people will only pay 22% if CGT is chargeable.

Baz

[Debra]

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[WendyG]

This is most interesting as I am at present trying to ascertain the following:

 

As a resident of the UK and therefore paying tax there, if you sell a maison secondaire which has been owned for 5 years, obviously one pays the French CGT, but  do you have to pay CGT in the UK on the profit if you re-buy in France, bearing in mind that you have not taken the monies back to UK.

I have heard various answers and am at present waiting to hear from my accountant to try and clarify the position.   After all the "profit" would have arisen in France and would remain in France, and presumably any new property purchased would have increased in price also so it would make it impossible to move house in France as each time you would lose a sizeable chunk in CGT, but still have to pay the increased price.

Sorry, it sounds a bit waffly,

I fancy somewhere a bit warmer in the winter but cannot see how I could afford to move if CGT is going to be payable.

[Pickles]

[quote user="Debra"]What happens if you don't pay tax?  Same?  (ie 22%)[/quote]

You have a tax-free allowance of around £7.5K per person, above which you then pay 22%. If the gain is high enough, IIRC, you will then pay 40% above the 40% threshold.

Regards

Pickles

[Pickles]

[quote user="WendyG"]

As a resident of the UK and therefore paying tax there, if you sell a maison secondaire which has been owned for 5 years, obviously one pays the French CGT, but  do you have to pay CGT in the UK on the profit if you re-buy in France, bearing in mind that you have not taken the monies back to UK.

[/quote]

Yes. Unless you are UK resident but not UK domiciled, in which case the remittance basis may apply. Most UK-born UK residents will be UK domiciled. If the second home is actually an investment property owned by a suitably-structured company with suitable articles of association (which I would think basically means a property development company), then the tax treatment might be different (ie the tax might be deferred, or the gain may be classed as income rather than capital gain etc), but I'm pretty sure that this would NOT be the case for buy-to-lets or most second homes.

[quote user="WendyG"]

After all the "profit" would have arisen in France and would remain in France

[/quote]

Doesn't matter, I'm afraid. As a UK domiciled, UK resident person you are liable in the UK for worldwide income and capital gain, pretty much wherever it arises. However, you are able to offset against the UK CGT  liability any CGT that you have paid in France.

[quote user="WendyG"]

and presumably any new property purchased would have increased in price also so it would make it impossible to move house in France as each time you would lose a sizeable chunk in CGT, but still have to pay the increased price.

[/quote]

Well, it depends on how long you've owned the property etc - if you owned the property for 15 years then the French CGT would be nil and the UK CGT would be reduced by taper relief to to be based on 60% of the gain after 10 years ...

Regards

Pickles

[WendyG]

Thanks pickles - it seems you are caught for tax whatever and wherever you are.  It looks as though I will have to stay put for another 10 years and not move to a warmer area!  If I have to pay CGT then I would not be able to afford to buy another property particularly further south.

 

 

[Debra]

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