Share this content

Capital Gains tax on selling overseas land

Capital Gains tax on selling overseas land and if there are any scheme available to avoid CTG

Didn't find your answer?

Hi all,

I have a client who has some land in Pakistan and he wants to sell the land in Pakistan and bring all the funds here in UK. The plan is to transfer the funds to his children so they can buy a property here in UK. 

The land was not in use and it did not earn any rental income so the land was never declared to HMRC and HMRC is not aware of the land existing. The total value of the land is around £1 million and it was inherited about 25 years ago when the value of the land was probably £50k. The client is UK resident and UK tax payer.

I would like to know if there are any ways the client can avoid Capital Gains tax and if there any scheme available. If not then how much will be the CGT liability and what can be done to reduce it.

Any help will be greatly appreciated.

 

Replies (16)

Please login or register to join the discussion.

Maytuna
By DJKL
31st Aug 2020 10:42

£1,000,000-£50,000=£950,000 gain

ignoring all reliefs, and assuming a higher rate taxpayer,

20% of £950,000= £190,000

Accountants are cheaper.

Thanks (0)
Replying to DJKL:
avatar
By Prestige Bookkeeping
31st Aug 2020 17:29

DJKL wrote:

£1,000,000-£50,000=£950,000 gain

ignoring all reliefs, and assuming a higher rate taxpayer,

20% of £950,000= £190,000

Accountants are cheaper.

Why 20 percent. I thought it would be 28 percent.

Thanks (0)
avatar
By paul.benny
31st Aug 2020 10:54

Have you considered whether tax will also be due in Pakistan?

Have you also considered potential IHT liability on the gift?

Whilst not insurmountable, your client may well face AML challenges both on bringing those funds into the UK and purchasing real estate with it.

Thanks (0)
avatar
By Tax Dragon
31st Aug 2020 10:59

The easiest and best way to reduce UK CGT - potentially to Nil - would be to pay the tax properly due in Pakistan.

Advising on that tax is, I suspect, definitely not covered by your PII.

Thanks (0)
avatar
By fawltybasil2575
31st Aug 2020 12:26

@ Prestige Bookkeeping (OP).

If you start by looking at the GOV/UK guidance here:-

https://www.gov.uk/tax-sell-property/selling-overseas-property

and then do some googling re Pakistan Tax, eg here:

https://www.zameen.com/blog/everything-you-need-to-know-about-taxes-on-p...

you will hopefully soon form the correct view that the amounts at issue warrant, crucially, advice from a taxation specialist able to assess the INTER-ACTION between tax in Pakistan and the UK. That advice should cover also, as an esteemed contributor above has stated, Inheritance Tax implications.

Before reading the guidance per the second link above I was entirely unaware of the (seemingly) generous rules re Capital Gains in Pakistan.

I assume that your client is UK Resident, and likewise domiciled, and that this status will continue: but such may not perhaps be the case.

In intending no offence, if (as appears almost certain) this matter is outside your comfort zone, than there is no shame in admitting that such is the case: and advice henceforth should be given direct by the taxation specialist to your client (not by the specialist to you for you to relay to your client) so that you are not “at risk” from either (a) such advice being incorrect or (b) your having insufficient knowledge to defend any improper claim by the client that the advice is incorrect.

Basil.

Thanks (0)
Red Leader
By Red Leader
31st Aug 2020 15:41

What's that noise? A distant humming. It sounds like "overseas trust", I think.

Thanks (0)
Replying to Red Leader:
Maytuna
By DJKL
31st Aug 2020 15:49

Presume you can tell it is an overseas trust by what it hums, a Scottish one has the faint drone of bagpipes an English one Jerusalem and a Swiss one has absolute and total silence.

Thanks (0)
avatar
By Prestige Bookkeeping
31st Aug 2020 17:51

I was just wondering if there is any relief available if the increase in property price is largely due to inflation e.g if I bought property in 1930 then it probably was £1000, which was a lot of money at the time and if I were to sell it now for £10 million then it is not fair in my opinion to pay CGT on £10 million gain?

Thanks (0)
Replying to Prestige Bookkeeping:
avatar
By Tax Dragon
31st Aug 2020 18:13

If that was all you were wondering, your OP is highly misleading. The answer is no, and if you didn't know that, it doesn't augur well for the help you are being to your friend.

Please take - or, rather, suggest your friend takes - Basil's advice.

And... if an accountant is cheaper than 20%, s/he's even cheaperer than 28%.

Thanks (1)
Replying to Tax Dragon:
avatar
By Prestige Bookkeeping
01st Sep 2020 11:08

Tax Dragon wrote:

If that was all you were wondering, your OP is highly misleading. The answer is no, and if you didn't know that, it doesn't augur well for the help you are being to your friend.

Please take - or, rather, suggest your friend takes - Basil's advice.

And... if an accountant is cheaper than 20%, s/he's even cheaperer than 28%.

Well have you not heard about indexation allowance, which did take into account inflationary increase so the question is very relevant. Yes it is no longer allowable but I wanted to know if it got replaced by something else.

Do you want to have an accounting quiz and we will know who knows more?. Why do some users have to launch personal attack.

Thanks (0)
Replying to Prestige Bookkeeping:
avatar
By justsotax
01st Sep 2020 11:15

To be fair no one is claiming to know more (than you?!)...they have already advised to seek specialist advice.....get over yourself and provide your friend with the most appropriate advice for the situation....

Thanks (0)
Replying to Prestige Bookkeeping:
avatar
By Tax Dragon
01st Sep 2020 11:41

Prestige Bookkeeping wrote:

Yes it is no longer allowable but I wanted to know if it got replaced by something else.

Do you want to have an accounting quiz and we will know who knows more?. Why do some users have to launch personal attack.

In reverse order...
1. Some people do, but why raise that on a thread where (as justsotax intimates) it hasn't happened? If I, personally, sounded frustrated, it was because your OP talked about "any scheme" while your actual question seems to relate to successors to indexation.
2. No. I'm sure you know more than me overall. But conceivably not about the topic you have asked about - it's why you asked, right?
3. It did. Taper relief. In turn, that was replaced by entrepreneurs' relief. This continues, though it is now known as business asset disposal relief. BADR, as the name suggests, applies to business assets. So it's not relevant to you/your client/the family friend/whoever you're actually talking about (everything changes as this thread moves along!) Taper relief did apply to non-business assets. There is no successor I know of to general non-business asset taper relief.

Thanks (0)
Replying to Prestige Bookkeeping:
avatar
By Paul Crowley
01st Sep 2020 11:41

The question is a tax question.
Nothing to do with accountancy
It is also a question on Pakistani tax first, before UK tax applies.

Thanks (0)
avatar
By Paul Crowley
31st Aug 2020 19:21

Steer clear
All tax ageements between countries start with property tax being taxed in the country the property is in.
It is £1 Million. He can afford to take correct advice.

Thanks (0)
Share this content