Share this content
9

FHL, period of grace and Entrepreneur's relief

FHL, period of grace and Entrepreneur's relief

Didn't find your answer?

Good morning

An individual sold a property in France in 2013-14, with a gain subject to CGT.

According to the infos I have (period of availability and actual let), it qualified for FHL until 2011-12 but didn't qualify in 2012-13 and 2013-14 (however it met the availability threshold and there was a genuine intention to let).

It is not clear yet whether the previous accountant ever filed as FHL until 2011-12. All I have is the last tax return where income was declared as foreign rental income, and no election was made.

Assuming it had been declared as FHL previously, I believe I would still have time to make an election for last year's tax return for a period of grace, which would cover 2012-13 and 2013-14  - and amend last year's return. The property would then qualify for ER.

Could someone confirm this, and advice on how to make this late election?

Thank you.

Replies (9)

Please login or register to join the discussion.

By plummy1
07th Oct 2014 20:39

Seek and ye shall find

The answers you are looking for (sorry to sound a bit like Yoda there) are in HMRC Helpsheet 253 - see period of grace  

https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...

Hope this helps.

Regards

John

Thanks (1)
avatar
By Chipette
08th Oct 2014 10:32

Thank you John, I had read the helpsheet and was looking for confirmation. It looks like the accountant never filed as FHL so a late election isn't on the cards anymore.

Thanks (0)
Replying to thevaliant:
By plummy1
08th Oct 2014 16:55

I think your right

Hi,

Yes when I read the guidance it is clear that the property has to have qualified as an FHL in the year before the first election. If the tax year is closed in which it could have first qualified then I can't see a way back. 

Regards

John

Thanks (1)
avatar
By michaelblake
08th Oct 2014 19:48

Another way of looking at it?

If the activity qualified as a FHL up to 5 April 2012 (irrespective of whether the (deemed) FHL trade was correctly declared as such) but cannot qualify after that date because the FHL qualifying conditions were not met, would it not be open to you to claim that the FHL trade ceased on 5 April 2012 and that the gain qualifies for ER since the disposal of the property has taken place within three years of that cessation?  

Thanks (1)
Replying to Micawber:
avatar
By Chipette
09th Oct 2014 09:20

Irrespective of whether it was declared as such?

michaelblake wrote:

If the activity qualified as a FHL up to 5 April 2012 (irrespective of whether the (deemed) FHL trade was correctly declared as such) but cannot qualify after that date because the FHL qualifying conditions were not met, would it not be open to you to claim that the FHL trade ceased on 5 April 2012 and that the gain qualifies for ER since the disposal of the property has taken place within three years of that cessation?  

But surely wouldn't HMRC insist on the correct treatment of the property rental in earlier years? For example they have claimed Wear & Tear so the rental income declared is understated at least for the last three years (no capital investment made for the same period so no CA available to offset).

Thanks (0)
avatar
By Expat24
08th Oct 2014 21:41

If the property is sited in France

then there is a French CGT liability.

Thanks (1)
Replying to DJKL:
avatar
By Chipette
09th Oct 2014 09:21

Taper relief

Expat24 wrote:

then there is a French CGT liability.

 

Yes there is but it is minimal as taper relief applies in France (property was owned for over 10 years).

Thanks (0)
avatar
By Expat24
09th Oct 2014 14:10

No not "minimal" as Chipette suggests...

Taper relief for say 10 years is only 30%, then there is 19% normal CGT and potentially a CGT surcharge depending upon the amount of the gain - the CGT surcharge ranges from 2% to 6%.  Currently CSG/CRDS of 15.5% is also being retained on property gains although the European Courts have said it is not appropriate to charge these Prélevements Sociaux to non-residents, nevertheless, the French notaires still do just that in order to protect their position as the French Govt is fighting this ruling!

Thanks (0)
avatar
By Chipette
09th Oct 2014 15:10

Minimal in this case compared to UK CGT at normal rate

I understand your point Expat24 but I meant minimal French tax in this particular case (after several deductions including taper relief and an extra 25% deductions for properties sold before September 2014)

also the UK gain includes a foreign exchange rate gain.

Basically the UK tax at 28% would be roughly twice the French tax suffered in this case.

 

Thanks (0)
Share this content

Related posts