Hi,
I have a client who was born / resided in a country in Asia and is now a resident in England after getting married to a UK citizen and coming over on a spouse visa. He has some land which is actually in both names of his and his wife that he plans on selling and transferring the money over into UK to reduce the mortgage on their property. My question is around any tax they might be liable to pay. The sales value will be approximately £60k.
As the land is in both of their names, I guess the sales proceeds will be 30k each. There was no cost to them for this land as it was given to them.
Can anyone advise what the tax position would be?
I am assuming they would have the tax free capital gains limit and have to pay tax on the remaining balance?
Please advise.
Many thanks guys.
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check tax treaty
with the foreign country - it is likely that taxing rights are given to the country where the land resides - therefore no UK tax (or if there is they will get DTR) and foreign tax instead.
If it was a gift...
... and if there is a gain to be taxed in the UK, then the base cost of the asset is the market value at the time of the gift
Hi Guys,
Thanks for the responses so far. Appreciate it.
Yes, there is tax that will be getting paid in the other country on the sale.
The land was given free by the government as a form of pension but no longer needed due to permanent relocation.
Am i right to believe that even though the tax would have already been paid (in Pakistan to be precise), the net proceed will still have to be taxed on the amount above the annual CGT limit? As there was no cost, the full amount would be classified as capital gains?
Another thought is that the land is sold in 2 parts each falling in different tax years so to benefit twice from the annula exemption?#
Any thoughts?
UK/Pakistan Double Tax Treaty
Article 14 Capital gains
(1) Subject to the provisions of paragraph (2) - gains relating to ships & aircraft - of this Article, capital gains which arise in a Contracting State may be taxed by that State in accordance with the provisions of its domestic law.
Article 23Elimination of double taxation
(1) Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom (which shall not affect the general principle hereof):
(a) Pakistan tax payable under the laws of Pakistan and in accordance with this Convention, whether directly or by deduction, on profits, income or chargeable gains from sources within Pakistan (excluding in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income or chargeable gains by reference to which the Pakistan tax is computed.
The gain will be the gross proceeds less costs and expenses, but not tax, with a credit for Pakistan tax paid against the UK CGT.
Whether the gain is split across two years and gets two years annual exemption rather depends on the reason for it being split. Sale of individual plots to unconnected purchasers in different years should be OK. Otherwise it could all be assessed as one.