[seasoar]

Hey - if George makes us Expats pay CGT on our UK house sales . . . won't that stop most of us selling? That will add to the shortage of UK property on the market . . . which will push up property prices even more . . .

Dooooooooooh !!!!!!!!!!!! - Good thinking George

:confused2:

 

[David_&_Letitia]

Hey - if George makes us Expats pay CGT on our UK house sales . . . won't that stop most of us selling? That will add to the shortage of UK property on the market . . . which will push up property prices even more . . .

Dooooooooooh !!!!!!!!!!!! - Good thinking George

:confused2:

I don't understand what you're alluding to here - CGT is already payable if the property is NOT your main home...

 

[seasoar]

It's not if you become resident in Cyprus.

 

[MartynKSA]

It's not if you become resident in Cyprus.

Really?

I thought that CGT was only not paid on disposal of your main residence if you had occupied it no more than 5 year ago. If more than 5 years, you pay CGT on disposal (as you would on any other investment property).

How does your residency in Cyprus get round that?

 

[David_&_Letitia]

It's not if you become resident in Cyprus.

My understanding is that George Osborne is targeting foreign investors in the UK property market which is causing price inflation in London. I believe that UK citizens, who are non resident in the UK are still liable:

HM Revenue & Customs: Tax on UK income or capital gains for non-UK residents

 

[seasoar]

Wish you were right however CGT at moment is dependent on the rules of the country you reside in. ie. Cyprus does not charge its residents CGT on sale of UK property. George is considering changing the rules so CGT would be charged by the 'UK' on anyone who is non resident and sells a second home in the UK. So anyone who has invested in UK property for their pension plans for their retirement is potentially going to be stuffed. They call it the 'Equity trap' and if they change the rules it will send many people broke. The very wealthy who George is supposed to be targeting will probably not bother selling or they will long term let the properties out and invest elsewhere in future.

 

[PeteandSylv]

I am rather puzzled by this thread.

If you invest in property that is not your main residence, you would always have been charged CGT on disposal in the UK.

Does this change relate to a property investment under an no-tax umbrella for a pension plan?

Even so if you have a property that has made a substantial capital gain and you sell it, the CGT is a proportion of the profit. So why would that make you go broke? You still have the balance which includes the profit from the original investment.

Pete

 

[seasoar]

if you remortgage the (second) property a couple of times (for other investments). CGT is calculated on original purchase price against sale price - not the new mortgage! minus improvements - so now when you sell and pay back the mortgage you get a bill from HMRC instead of a profit from the sale ... so if you haven't got any extra money you can't sell or if you do you go broke!

 

[PeteandSylv]

if you remortgage the (second) property a couple of times (for other investments). CGT is calculated on original purchase price against sale price - not the new mortgage! minus improvements - so now when you sell and pay back the mortgage you get a bill from HMRC instead of a profit from the sale ... so if you haven't got any extra money you can't sell or if you do you go broke!

Sorry I still can't see anything new. Capital gains tax is based on the capital gain (profit) between buying and selling price and has no regard for whether you financed the purchase with your own cash or the bank's cash. Therefore the mortgage does not come into it.

If you keep using the property as collateral for additional loans it's your problem and possible the banks as this is exactly what has caused so many problems here in Cyprus. It's called irresponsible lending and irresponsible borrowing where the loan exceeds the value.

In a product based business you would accept that you buy product and sell at a profit paying tax on the profit, so why not with a property based business?

Pete

 

[MartynKSA]

George is considering changing the rules so CGT would be charged by the 'UK' on anyone who is non resident and sells a second home in the UK.

But hasn't this always been the case? You can only avoid CGT if you sell your main UK residence within 5 years of using somewhere else as your main residence, be that elsewhere in the UK or anywhere else in the world.

I have known some wealthy people in the past where (so they say) the husband lives permanently in one house (usually a holiday home) and the wife permanently lives somewhere else (the family home). No idea if they got away with it.

 

[MartynKSA]

George is considering changing the rules so CGT would be charged by the 'UK' on anyone who is non resident and sells a second home in the UK.

But hasn't this always been the case? You can only avoid CGT if you sell your main UK residence within 5 years of using somewhere else as your main residence, be that elsewhere in the UK or anywhere else in the world. Otherwise it will be treated the same as disposal of any other investment asset.

I have known some wealthy people in the past where (so they say) the husband lives permanently in one house (usually a holiday home) and the wife permanently lives somewhere else (the family home). No idea if they got away with it.

 

[seasoar]

loan doesn't exceed the value by a long way! - the gain is not profit - it's inflation. If you have to pay CGT you can't buy back the same asset you sold. Or even any asset with a negative bank balance.

 

[PeteandSylv]

But hasn't this always been the case? You can only avoid CGT if you sell your main UK residence within 5 years of using somewhere else as your main residence, be that elsewhere in the UK or anywhere else in the world.

I have known some wealthy people in the past where (so they say) the husband lives permanently in one house (usually a holiday home) and the wife permanently lives somewhere else (the family home). No idea if they got away with it.

Quite so, although I don't know what today's qualifying period is.

I knew a guy in my youth who managed to buy a plot of land just outside London where he built himself a house. He lived in it for the qualifying period, which I thought then was 18 months, while he built the next house on the estate to be. He moved into house 2 and so on going around the entire estate living in each house before selling it. He retired a multi-millionaire free of any CGT as London progressed outwards!

Pete

 

[seasoar]

If he had kept each house remortgaged and let it out. ie provide accommodation and maintain the properties to people who could not afford to buy. He would on selling be faced with a very large cgt bill and no profit. . . . Inflation!

Ps we have paid all our tax on rental over the years too.

 

[PeteandSylv]

If he had kept each house remortgaged and let it out. ie provide accommodation and maintain the properties to people who could not afford to buy. He would on selling be faced with a very large cgt bill and no profit. . . . Inflation!

Ps we have paid all our tax on rental over the years too.

In this theoretical example, if he had no profit then his costs exceeded his income, thus either his costs were too high or his rentals were too low or both. Inflation of course would have raised the selling prices increasing any profit of which CGT is only a proportion.

Perhaps you would like to offer your scenario with some actual numbers if I'm missing something vital and could you also explain why you say remortgage rather than mortgage. Also I would point out that lots of people rent because they wish to and not because they cannot afford to. I know at least 2 landlords to whom this applies.

Pete

 

[seasoar]

Hi Pete - Interesting to hear other peoples take on this. There is a profit if you ignore inflation of course.

The UK tax manual has more words in it than 'War and Peace' but with plenty more holes I suppose - but put simply we have done exactly the same as MartynKSA's chap - he would have remortgaged too, except that because we haven't sold anything for ages, if George does what he is threatening, people like us will get a CGT tax bill on everything whilst people like MartynSKA's chap will have paid nothing.

This is all hypothetical at the moment of course - but just look at how a small change in the lending, ie the 5% deposit scheme with a government backed mortgage has engineered a new property bubble - funnily enough just 2 years before the election!!!!!

A small change in the CGT rules is not going to make the government any money as history shows - every time they have hiked taxes in the past the takings have dropped - but it is very likely to stop people selling, put people off buying and push already high prices even higher in London because of the lack of supply. It's just a vote collector.

UK already has some of the highest property taxes in the western world -

ps we are renting too!!!

 

[PeteandSylv]

Hi Pete - Interesting to hear other peoples take on this. There is a profit if you ignore inflation of course.

The UK tax manual has more words in it than 'War and Peace' but with plenty more holes I suppose - but put simply we have done exactly the same as MartynKSA's chap - he would have remortgaged too, except that because we haven't sold anything for ages, if George does what he is threatening, people like us will get a CGT tax bill on everything whilst people like MartynSKA's chap will have paid nothing.

This is all hypothetical at the moment of course - but just look at how a small change in the lending, ie the 5% deposit scheme with a government backed mortgage has engineered a new property bubble - funnily enough just 2 years before the election!!!!!

A small change in the CGT rules is not going to make the government any money as history shows - every time they have hiked taxes in the past the takings have dropped - but it is very likely to stop people selling, put people off buying and push already high prices even higher in London because of the lack of supply. It's just a vote collector.

UK already has some of the highest property taxes in the western world -

ps we are renting too!!!

I still don't understand what your point is because you haven't answered any of my points. Indeed you have added to them. You can't just say there is a profit if you ignore inflation therefore your argument is right.

I also continue to think you have implied a confusion with the basis of calculating profits each time you bring the word remortgage into it. If only you would explain with an example using numbers.

The rates of taxes are a different topic to this discussion. What we need to clarify is your contention that deducting a percentage of profit (the CGT) wipes out the profit or worse.

Pete

 

[MartynKSA]

so now we know

Autumn Statement 2013: Sell up in 18 months to avoid capital gains tax - Telegraph