total number of days spent in
any UK property you own in
the relevant tax year meets
the 90 day rule - but you can
only nominate one property
for Private Residence Relief.
If you don’t meet the 90 day rule
you will be counted as away from
the property for that tax year.
As, to be classed as UK non
resident, you will already have
had a “long absence” and you
will also, in all likeliehood, have
an established home where you
are, the odds that you will be able
to persuade HMRC that you are
not liable is slim.
There is, however, a bright spot
on the horizon.
Obviously everyone’s circumstances are different and you
should always take proper
professional advice from the
Inland Revenue concerning
your own very personal circumstances - they are extremely patient and very helpful.
Yes, seriously, they are - their
helpdesk (more than anyone
else) appreciates how complex
these new changes are and how
many of us genuinely want to do
the right thing, but are worried
we will get it wrong.
However, as a very rough guide,
the generic info that follows
is what I understand will apply to
most of us.
If you are l ikely to be liable for
Capital Gains Tax and are thinking about selling your property
in the UK, they recommend that
you get a full, independent valuation, in writing, ASAP.
It is important to get a valuation
now rather than later as, using
a system known as “rebasing”,
your gain or loss can be based
on the “real” value of the property at the beginning of April
2015. However HMRC has to
be convinced that the valuation
was fair, reasonable and totally
independent.
NB: A full independent survey
may cost between £500 - £700.
However, having an honest and
independent report from a Quantity Surveyor may well help to sell
your house as it is an extra
USP that any buyer is likely to
appreciate, not least as it shows
your absolute confidence in the
property you are trying to sell.
Hopefully, it will also justify your
asking price.
When the house sells and you
are left with a capital sum, you
will have an annual allowance
for Capital Gains against which
you can claim (if you haven’t
used it up that year, already).
Until April 2016 the personal
Annual Exempt Amount is set at
£11,100.
If you sell a newly inherited property, or you represent a Trust,
this will vary - but most of us will
have the normal allowance.
With a base value for your property (the independent valuation), when it sells, you will then
have a sale value. You can then
apply a system that HMRC call
“rebasing”. Under this scheme
you will only be liable for the difference in value between what
the “provable value” in April 2015
was and what sale price you
achieve is (less your personal
Annual Exempt amount).
So, if your house sells for less
than the value it had in April plus
your personal allowance - you
will not have to pay tax. If your
house sells for more than those
two amounts combined, then
you will only pay Capital Gains
tax on the difference - after you
have also deducted any costs of
improving the property incurred
after 5 April 2015 and the legal
cost of selling the property.
If you cannot prove the “true
value” of your property in April
2015, you will be reliant on
HMRC agreeing to your own estimate of value and that could be
difficult. It may mean that you
cannot use the “rebasing” system, so they will then be looking
at the amount that you paid for
the property. This is a little more
complicated!
They will also accept a Time Apportionment system and the fall
back is the overall gain since it
was purchased. In the three examples (on the next page) the
property sells in June 2016 for
£1.25m having been owned for
65 months. In their example the
house has gained more taxable
based income using the April
2015 Valuation that it would if
the Time Apportionment method was used - but because the
owner has had a valuation they
can pick the method that costs
them the least.
I am biting the bullet - but, in
HMRC’s own words... It’s up
to you to choose how to value
the property and whether to get
more than one valuation, HMRC
don’t have a preference for how
this should be done. It’s not necessary to get a valuation carried
out in April 2015 instead you can
wait until you make the disposal. It’s sensible to record in April
2015 what condition the property is in and any unusual features
as this will help make a fair valuation later on.