CGT

CGT

Didn't find your answer?

I purchased a house in Canada in April 03 for $270,000. I am looking to sell in 09 for hopefully $500,000.

I know that the new rules will apply and I will be taxed at 18% of the net gain but will I qualify for letting relief (I currently let the house out on a full time basis to a Canadian family)? Will I also be able to be exempt from the last 3 years?

Also I know I will be taxed in Canada on the gain at their rate of tax (21.3%??). But I assume this will be deducted off of the tax I have to pay in the UK. As the Canadian rate is more I assume I have to pay the higher rate of tax and not get back the difference between the 2 taxes?

Look forward to any comments.
Kathryn Hargrave

Replies (4)

Please login or register to join the discussion.

avatar
By k40911
09th Feb 2008 18:27

Domicile?
You have not mentioned where you are domiciled.

If you are not-UK domiciled you could escape paying UK CGT if the gain is not remitted to the UK and you pay the £30,000 annual charge.

If you are UK domiciled or you are not-domiciled and you do not claim the remittance basis then your rental income is also reportable in the UK.

Thanks (0)
avatar
By thehaggis
07th Feb 2008 17:20

Remember

Tax Credit Relief is computed on a like for like basis on the same profits.

For example, if the Canadian rules say that the gain is £200K but the UK rules calculate the gain to be £230K; TCR is only due against the first £200K of the gain. The TCR will wipe out any tax payable on the first £200K, but there will be UK tax to pay on the remaining £30K.

Thanks (0)
avatar
By AnonymousUser
07th Feb 2008 16:25

As to...
... the second part of your question, you are basically right that the Canadian tax is deductible from the UK tax payable. The technical term is creditable but it means the same as deductible.

Worth noting though that, in addition to the difference in tax rates, it is likely that Canada has a different way from the UK of working out the amount of gain to be taxed.

I can't help on how Canada works out the gain but for the UK gain, you take the $ cost converted into £ at the rate on the date of purchase from the $ sales proceeds converted to £ at the rate on the date of sale. That gives the £ gross gain from which the annual exemption is deducted to get the net gain on which the 18% CGT is computed. Note: no taper relief will be available in 2009 according to the latest proposals.

If the Canadian tax is greater than the UK tax, there is no refund of the excess, unfortunately.

Also neither letting relief nor the last three years relief will apply because, as the previous respondent suggested, they are only available if the property has been the seller's private residence at some time.

Thanks (0)
avatar
By User deleted
07th Feb 2008 15:00

Residence
Question 1:

Was this house ever your only or main residence? The answer to this question will determine whether you are / may be entitled to Private Residence Relief (including Lettings Relief).

With that answer people should be able to help you further

Thanks (0)