Hi,
My husband and own a second holiday home in Cyprus and we are resident UK tax payers with our Main home here in the UK.
We rent out our cypriot property on a week by week basis to holiday lets.....it is available for let to the general public for 52 weeks a year from which we book 2 x 2 week holidays there one early and one late season and mostly to open / close & repair. This year it rented out for 120 days. But we can never guarantee that this will repeat the following year.
However still by renting it out for this amount of time it still makes no profit only a loss. We were thinking about selling the property, and I understand by cypriot laws we have to pay 20% CGT after costs/allowances etc but by UK laws seem to suggest that CGT tax payable would have been 10%.
Please can you advise which countries laws are we governed by in regard to this? and what rate of CGT we would be liable for.
Thanking anyone in advance for your help.
Nicky
Replies (7)
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CGT
I assume you are not qualifying this rental property af a Furnished Holiday Let.
http://www.hmrc.gov.uk/budget2009/furnished-hol-lets-1015.pdf
I am unsure where you are getting 10% from as CGT of property disposal 18% or 28 depending on your marginal tax rate. If the property is owned jointly then each of you would each pay CGT in Cyprus, with a dual treaty in place those CGT payments can be used in the UK to offset against any CGT liability. I/2 the gain after costs and your UK CG Allowance of £10,100 each. Then this gain is added to you 'total' UK income and tax at you individual marginal rate so some may be at 18% and some at 28% if your total income plus net gain exceeds the higher rate threshold.
Regards Peter
Pete
from the tone of the query I suspect that they are expecting to get ER to bring the rate down to 10%.
A quick look at a worldwide tax guide for Cyprus suggests that both residents and non residents are liable to CGT on immoveable property in Cyprus and the applicable rate is 20%.
To the extent that tax is paid in Cyprus it should be available as a credit against any UK CGT payable after other reliefs
Any reason why not?
"To the extent that tax is paid in Cyprus it should be available as a credit against any UK CGT payable after other reliefs"
Even if CGT in Cyprus exceeds UK CGT? This seems counter-intuitive, but on the other hand I haven't so far found any reason why not.
OK "should" was perhaps a bad choice of word
I cannot immediately think of a reason why not.
If ER is due then there would be tax payable in Cyprus, but less payable in the UK (probably) so no net cost here.
If ER were not due then the UK tax payable will be more so more (or possibly all) of the Cyprus tax would be utilised against the UK tax.
Depends on the basis of calculation and reliefs in each country.
If the property qualifies as FHL
which based on the numbers in your OP it should, then as things stand at present it should qualify for the entrepreneurs relief reduction of rate to 10%. But bear in mind that this remains under review so the reduced rate might be lost. That will be what the BBC article is on about.
As noted Cyprus would seem to tax residents and non residents alike to CGT on immoveable property in Cyprus and at the rate of 20%.
As UK residents you are liable to CGT on worldwide disposals leading to a potential double tax charge, BUT the tax paid in Cyprus will be available to set against any UK CGT due on disposal of the property
reflections
remeber the days until late 60s when there was no capital gains tax.
in economic calculus with the co-sines, etc. applied, would the abolition of cgt stimulate the economy to the extent where it was an unecessary burden?
food for thought, major and even political reactions no doubt initially, but comment will be appreciated.