CGT on sale of Spanish property

CGT on sale of Spanish property

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I have a client who owned an apartment in Spain jointly with his sister which they sold in 2013/14. They each filed a non-resident Spanish tax return and paid the Spanish CGT of €10,748.27 each.

For my client's SA Return I calculated the gain according to UK tax rules (ie: Sale proceeds less costs less purchase cost) giving a gain of £56,915 each. At 28% (higher rate taxpayer) this results in a tax charge of £15936.20, less the tax suffered in Spain of £9175.58 to give a UK liability of £6760.62.

The problem is that my client's sister has used a different firm who have just converted the gain shown on the Spanish tax return, £42,688. This gain is after allowing for the Spanish indexation adjustment that applied for part of the period of ownership and is used in the Spanish calculation. This reduces the gain to the point where no additional UK CGT is payable.

My question is which is the correct method of calculating the gain for his UK tax return - on the basis of sale proceeds less acquisition costs or what the gain was according to Spanish rules.

Replies (3)

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ghm
By TaxTeddy
26th Jan 2015 14:39

You are right

The gain needs to be calculated by UK rules. How the Spanish do it is neither here nor there.

And your UK tax bill sounds the right result - where you are giving a tax credit under treaty arrangements, the net result is that the taxpayer overall pays the highest rate across the two countries concerned - in this case the UK.

Thanks (1)
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By Neville Ford
26th Jan 2015 15:02

Thanks TaxTeddy, you know what it's like when you are a sole practitioner and the client says "Well the partner there is a CGT specialist", you begin to doubt your own sanity (especially this close to 31 Jan!)

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By Martin B
26th Jan 2015 16:13

Amended tax return for your sister.

If already submitted, get your sister to submit an amended tax return plus pay the extra tax due.

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