Buying a flat - IT and CGT implications


R

rt

Hi All

I am thinking of buying a flat. I intend to live in it for a little
while, before moving aboard. After that who knows, I might come back
and live in it, continue renting it or sell it. I have some questions
re: my possible tax liabilities.

1A) If I live in the flat for a year, say, and then rent it out, would
the full rental income be subject to income tax or would it be the
amount less mortgage repayments and interest on repayments? Would the
answer be any different if I was living abroad while the flat was
rented out, i.e. what is my position in terms of UK income tax if I
live and work abroad?

2) Say, I live in the flat for 3 years - I've made it 3 years this
time because of the CGT 36 month rule - and then move out to rent a
cheaper place down the road, i.e. I still only own the one flat in the
UK. Is the flat I own still considered my PPR (in terms of CGT) - to
put it another way, can a rented property ever be considered a PPR (in
terms of CGT)?

3) Finally, say I move abroad, like it and decide to buy a flat in the
new country (while still renting out my flat in the UK). According to
a book I read, the UK taxman will consider my new foreign flat my PPR
and so my UK flat will lose its PPR status (and therefore its PPR
exemption status in terms of CGT). Is this true? Given that I would
be complying with the laws in the new country, what has my foreign
flat got to do with the UK taxman!?

Any help would be appreciated. Thanks in advance.

Richard
 
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M

Mick

rt said:
Hi All

I am thinking of buying a flat. I intend to live in it for a little
while, before moving aboard. After that who knows, I might come back
and live in it, continue renting it or sell it. I have some questions
re: my possible tax liabilities.

1A) If I live in the flat for a year, say, and then rent it out, would
the full rental income be subject to income tax or would it be the
amount less mortgage repayments and interest on repayments? Would the
answer be any different if I was living abroad while the flat was
rented out, i.e. what is my position in terms of UK income tax if I
live and work abroad?

2) Say, I live in the flat for 3 years - I've made it 3 years this
time because of the CGT 36 month rule - and then move out to rent a
cheaper place down the road, i.e. I still only own the one flat in the
UK. Is the flat I own still considered my PPR (in terms of CGT) - to
put it another way, can a rented property ever be considered a PPR (in
terms of CGT)?

3) Finally, say I move abroad, like it and decide to buy a flat in the
new country (while still renting out my flat in the UK). According to
a book I read, the UK taxman will consider my new foreign flat my PPR
and so my UK flat will lose its PPR status (and therefore its PPR
exemption status in terms of CGT). Is this true? Given that I would
be complying with the laws in the new country, what has my foreign
flat got to do with the UK taxman!?
you usually pay the tax on your UK property in your new country of residence
 
J

john boyle

Mick said:
you usually pay the tax on your UK property in your new country of residence
Do you think you could add a little more detail?
 
J

john boyle

Mick said:
no, we need to know his new country of residence.
Despite living abroad he will still be domiciled in UK.

He will have to pay UK Income Tax on the rent and CGT on any profit on
sale subject to apportionment for the period it was his PPR, (ignoring
the last 3 years).
 
1

1keytools david

I am thinking of buying a flat. I intend to live in it for a little
while, before moving aboard. After that who knows, I might come back
and live in it, continue renting it or sell it. I have some questions
re: my possible tax liabilities.

1A) If I live in the flat for a year, say, and then rent it out, would
the full rental income be subject to income tax or would it be the
amount less mortgage repayments and interest on repayments? Would the
answer be any different if I was living abroad while the flat was
rented out, i.e. what is my position in terms of UK income tax if I
live and work abroad?
If the mortgage was used to buy the flat the payments will be
deductable. What you pay and how much to the UK/other country depends
partly on what is in the dual tax agreement between the two countries
(if any).
2) Say, I live in the flat for 3 years - I've made it 3 years this
time because of the CGT 36 month rule - and then move out to rent a
cheaper place down the road, i.e. I still only own the one flat in the
UK. Is the flat I own still considered my PPR (in terms of CGT) - to
put it another way, can a rented property ever be considered a PPR (in
terms of CGT)?

3) Finally, say I move abroad, like it and decide to buy a flat in the
new country (while still renting out my flat in the UK). According to
a book I read, the UK taxman will consider my new foreign flat my PPR
and so my UK flat will lose its PPR status (and therefore its PPR
exemption status in terms of CGT). Is this true? Given that I would
be complying with the laws in the new country, what has my foreign
flat got to do with the UK taxman!?
I don't know the rules about PPR but if you are staying permanently in
another country so that you are no longer tax resident in the UK when
you sell the buy-to-let then you won't pay UK CGT at all. You need to
know the rules for UK tax-residence for this. You will pay CGT
wherever you are living/tax resident if it is due which depends on
which country you move to etc.

PS I'm not a tax advisor and the above is just my opinion so if you
want someone you can sue if the info is wrong, please find someone
who charges you accordingly.

David. 1keytools.

Software author. (please edit my email addr. to prove you're not a dumb 'bot)
Web Log Analyzer by Search Term http://www.1keytools.com/wlabstfeatures.htm
Kybie GetEmAll - Make IE an offline browser http://www.1keytools.com/offline_browser.htm
 
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D

Doug Ramage

john boyle said:
Despite living abroad he will still be domiciled in UK.

He will have to pay UK Income Tax on the rent and CGT on any profit on
sale subject to apportionment for the period it was his PPR, (ignoring
the last 3 years).
In these circumstances, domicile is less important than residence (for tax
purposes) and any relevant Tax Treaty. Disposal, while non-resident
(including the 5 year rule as to returning to the UK), should be exempt from
UK CGT.
 
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M

Mick

john boyle said:
..3
Despite living abroad he will still be domiciled in UK.

He will have to pay UK Income Tax on the rent and CGT on any profit on
sale subject to apportionment for the period it was his PPR, (ignoring
the last 3 years).
I paid Australian income tax on UK property rent income whilst on a 4 year
working visa, I needed to apply for a tax exemption certificate to give to
the UK property agent who are normally required to pay the tax for you, was
also claiming LAFHA (living away from home allowance) which was a very
decent tax allowance in Oz.
 

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