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CG on sale of property abroad?

My customer has purchased a land abroad and later built a property on this land. Now he wants to sell it for £100k and use it as a deposit in a purchase of property in UK. As he does not own any other properties in UK, he will use this one as his permanent house.

It is difficult to find anything about it on the HMRC website.

I was wandering whether this sale would attract a capital gain tax relief on the basis that the money is reinvested into new tangible asset (roll-over relief)?

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residence and domicile

this depends on his residence and domicile status,

overseas domicile would mean no cgt(even if uk resident)

application of reliefs will go with whether he is liable to cgt.

assuming he is resident and uk domiciled then reinvestment rlief will be applied if the

a) the property was a business property and being used in a business.

b) the new property is also business property

the purchase price of the new property is the same or more as the sale price.

if the purchase price is less than theold property's sale price then the reinvestment relief will be restricted.

also if its a business asset look at entreprenuers relief

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Reinvestment relief?

I don't think so

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Based on the information given - no

Based on the information you've given there is no chance of rollover relief.

I guess your concern was because the property being sold was abroad and therefore whether the gain from its sale could be rolled over. The trouble isn't with the location of the property its that the replacement asset in the UK isn't a business asset.

To mitigate the CGT on the foreign property david5541 is right -consider whether the ER rate of tax applies. 

 

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Trade?

Is this perhaps an adventure in the nature of a trade i.e. property development, (assuming of course the "customer" is UK resident), rather than a capital disposal? If so, income tax is payable rather than capital gains tax and there is no chance of roll-over or any other capital gains tax relief.

You need to establish the intention on acquisition of the land and at the time the construction started. If the idea on commencement was that the property was to be sold on then it is likely to be a trade whereas if it was the intention that the property was to be held as an investment property or as a private residence then it would be a capital gains tax matter.

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Non-Trade

It was purchased initially as personal investment and developed for private use. but later he decided to sell it and purchase sth in UK instead.

I was worried that we will not be able to use it and wanted to confirm.

Thank you for all the answers, all comments were helpful.

 

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