Tax implications on overseas property

Hi all,

I am wondering if anyone has any ideas on what the tax implications would for a person settled here who gets naturalised and gets a British passport.

For example, Capital Gains Tax. A property bought overseas a number of years ago when a person wasn't a resident here. The individual then gets ILR and eventually a British passport. Do they pay tax on gains from the overseas property? HMRC guidelines is clear in this regards, that there is obviously tax to be paid on gains from property overseas.

What I am not sure about is whether this applies to someone who wasn't a resident here when that property was first bought?
Secondly, is the law around taxation different when compared to ILR Vs British citizenship.

Any thoughts would be appreciated.
Thanks.

marke wrote:Hi all,

I am wondering if anyone has any ideas on what the tax implications would for a person settled here who gets naturalised and gets a British passport.

For example, Capital Gains Tax. A property bought overseas a number of years ago when a person wasn't a resident here. The individual then gets ILR and eventually a British passport. Do they pay tax on gains from the overseas property? HMRC guidelines is clear in this regards, that there is obviously tax to be paid on gains from property overseas.

What I am not sure about is whether this applies to someone who wasn't a resident here when that property was first bought?
Secondly, is the law around taxation different when compared to ILR Vs British citizenship.

Any thoughts would be appreciated.
Thanks.

Contact taxaid, http://taxaid.org.uk/, see if they can help.

That is a complicated situation and even HMRC themselves acknowledge that not all cases are the same and need to be treated differently. However, it should be noted that your immigration status has little bearing on whether you are liable for tax. Your residency/domiciliary status is what counts. i.e. for most categories of tax, if you were present for more than 183 days in a tax year, you are considered "resident for tax purposes" and liable for tax on your income. So to answer, it doesn't matter whether you had ILR or citizenship, but rather whether you are considered present in the UK for tax purposes.

There are reliefs that can be claimed. If there is a capital gains tax in the country where the property is located, you can claim "double taxation relief" and possibly end up paying nothing to HMRC. Remittance relief is another common one. If the proceeds of the sale are intended to remain overseas and you depend on them in the future - say you plan on emigrating permanently or they are tied to family property then you may well find that you have nothing to pay.

I'd suggest that if the amount of tax that you may potentially have to pay is significant, it may be worth engaging a UK tax accountant to help. They typically charge around £600 to help with HMRC returns. I think it would be worth it if the accountants fees would constitute no more than 30% of the tax amount in question otherwise it may end up an expensive exercise with little gains to be had.

Thanks so much for your help guys. Appreciate it !