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Capital Gains Tax - date of calculation


Tony the Turner

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We are thinking of selling our maison secondaire, bought in 1993.  Apparently CGT will not be payable if we have owned the house for 15 years.  Do those years run from the date of signing the contract to buy to the date of sigining the contract to sell or from the date of the final signing to buy to the date of the final signing to sell.

Sorry if this is an old topic but searching didn't come up with an answer

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[quote user="Tony the Turner"]We are thinking of selling our maison secondaire, bought in 1993.  Apparently CGT will not be payable if we have owned the house for 15 years.  Do those years run from the date of signing the contract to buy to the date of sigining the contract to sell or from the date of the final signing to buy to the date of the final signing to sell.[/quote]

(Panda got there first!) The property was not yours until the final acte signature, which is also the point at which the funds were transferred to the person from whom you bought it (or his/her representative). It will not be sold until your buyer signs the final acte and the money is handed over. Hence these are the key points. Note that although (depending on when it is sold) you may be free of French CGT, if you are UK resident (as appears from your sig) you will still have a UK CGT liability. After April 5th this year this will be a flat 18% and you will not benefit from either the pre-1998 taper relief nor the post-1998 system of relief.

Regards

Pickles

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[quote user="Cathy"]Surely you can't be double taxed - CGT in France and CGT in the UK - that has to be iniquitous (and unfair as well [Www])?  I need to know as well.

[/quote]

Depends what you mean by "double taxed". If you are UK resident and domiciled then you are liable to be taxed on your worldwide income and gains. Where there is a double taxation agreement, then depending on the terms, what it means is that you will not face full taxation against the same source twice.

In English, that means that you will receive a credit against any UK tax liability for any tax paid on the same source in France.

So, for example let's say that CGT in France is 10% and that in the UK is 15% and THERE ARE NO ALLOWANCES (obviously this is not the case but I'm doing this to keep it simple). Let's assume that you have a gain of 10000 € that arises in France.  You would therefore pay 1000 € tax in France. You are liable for CGT in the UK on the same whole amount, but this is offset by the tax already paid in France, so the amount that you pay in the UK would be 10000x15%-1000 = 500 € (or its equivalent in £).

To show you the difference, if there were no double taxation agreement, the above situation could be handled in one of two ways:

a) you pay 10% tax on the whole amount in country A and you pay 15% tax on the REMAINDER in the UK: total tax paid =2350

(this DOES happen with certain countries)

b) you pay 10% tax on the whole amount in country A and you pay 15% tax on the whole amount in the UK: total tax paid =2500

(in practice I don't think this treatment occurs in the UK but it does occur elsewhere, or so I am told)

Regards

Pickles

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[quote user="bigears"]I don't like the sound of this.  Does the notaire inform the uk tax authorities of a house sale involving a uk resident?  [/quote]

Almost certainly not. But if you are UK resident and domiciled, and you make a capital gain, you are liable to pay tax on that gain and you are required to declare the gain in your tax return. Also, if you bring the gains into the UK, the transfer might attract attention, as I understand (IIRC) that all bank transactions over £10K (? - dunno if this is the right number) require the banks to inform HMRC. Bear in mind also that as discussed earlier, the fact that there are CGT allowances in the UK may result in you having little or no UK CGT to pay.

Again, I ask, is everyone selling up? There's been rather a surfeit of CGT questions recently ...

Regards

Pickles

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[quote user="Pickles"][quote user="bigears"]I don't like the sound of this.  Does the notaire inform the uk tax authorities of a house sale involving a uk resident?  [/quote]

Again, I ask, is everyone selling up? There's been rather a surfeit of CGT questions recently ...

[/quote]

I'm not - just asking to plan my tax liability in the future.  However, it would be a good time to sell, bearing in mind the state of the pound against the euro.

 

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The Notaire won't notify HMRC but the tax authorities probably will. Remember that if you sell as a UK resident you only pay a basic rate of 16%, if tax resident it would be 27% so they have an interest in confirming that you really aren't resident.

A year after we purchased our house in France we had a letter from Inland Revenue asking what rental income we had received from France....

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hi

I, like cathy am not thinking of selling up and returning to the uk.  We will in all probability sell our maison secondaire at some point n the future and buy another on the continent, probably again in france.  I obviosly want to minimise any tax liability.  We will probably go down the route of transfering our residency to france in good time before we do it so as not to incur any tax liability on either side of the channel. 

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Look at that very carefully. As a French resident you would pay an effective rate of 27% on a second residence, as BJSLIV said. That might result in a rather larger tax bill than paying 16% then a little more in Britain (where you get an allowance anyway, unlike France).
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hi

The intension was to make it our principal residence so that tax doesn't have to be paid.  My limited understanding was that we could declare ourselves as being french residents, file 2 french tax returns and the french house becomes our principal residence.  Closer to the time, I will of course seek professional advice.  If there is a legal way of not paying tax I would like to find it. 

 

 

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