Capital gains tax - Page 2

Hi CPR2020,

As you say, you are fiscal residents in Spain, that is the country where you have your 'centre of vital interest'.  I assume you completed your initial Modelo 720 when you first became tax resident here and have to submit one this year to reflect the sale of your UK property last year.  There is a reason why the Modelo 720 is also known as the "declaration of worldwide assets", it is where you detail all assets you hold outside of Spain.

As you're probably aware, there is a Dual Taxation Agreement between the UK and Spain, which covers various types of tax, including CGT.  As such, you can't be taxed on any profit twice, i.e. in both countries, but for the purposes of CGT, you are taxed in the country of your habitual abode, i.e. Spain.

Kind regards,

Kim

I think CPR2020 needs to get some up to date advice from a UK accountant, or just by calling HMRC.  Kim's link about Spanish tax is dated December 2019.  I can't see that the UK rules since 06-Apr-20 allow for any special class of non-resident that enables them to avoid paying CGT in the UK when selling a property in the UK.

I'm sure this change in the rules was made to stop non-UK residents from exploiting rising UK property values by buying off-plan or in the early stages of new developments, then selling again at a higher price without ever living in the property.  In the past they would have paid the tax due in whichever country they lived, not in the UK.  This seems an entirely reasonable thing for HMRC to do and as a UK resident and tax payer I welcome the change.  I appreciate that CPR2020 hasn't done this, but he has nevertheless been affected by the new rule.

It seems to be cheaper to pay the CGT in the UK anyway, rather than in Spain, and the double taxation rule will prevent you from paying it twice.  This change should also make it easier and cheaper for other residents in Spain to sell property in the UK if they want to.

Hi Gordon,

On the Gov.UK website, dated February 2020, the opening paragraph about the UK's new CGT rules from April 2020, state:

"From 6 April 2020, if you’re a UK RESIDENT and sell a residential property in the UK you’ll have 30 days to tell HMRC and pay any Capital Gains Tax owed."

https://www.gov.uk/government/news/get-ready-for-changes-to-capital-gains-tax-payment-for-uk-property-sales

CPR stated they are a SPANISH resident, and have been so for the last 4 years.  They are not a UK resident.

Kind regards,  

Kim

My second link from gov.uk, which I have copied again here, concerns non-residents.

https://www.gov.uk/guidance/capital-gains-tax-for-non-residents-uk-residential-property

I can't see anything that says it does not apply in this case. Please correct me if I've missed something.

Thank you everyone for your comments. I have contacted a UK based accountant to ask the question which country I should make the payment from, it may work out cheaper to pay in the Uk even with the penalties that will apply 

Hi Gordon,

Yes, that is correct, they have to declare the disposal in BOTH countries - I have to do the same thing with UK property that I rent out.  But CPR's query was why the UK disposal incurs a tax liability in Spain, as the total proceeds from the UK property were used to purchase their Spanish home.  They have confused UK CGT allowances with Spain's - they are not the same.

My UK rental income is a good example of this - I have to declare the income in both countries and tax on the income has to be paid in the UK (as it does with CGT, Crown Pensions, etc.)  However, because I'm a Spanish resident, when I submit my tax declaration in Spain, the tax I've paid in the UK is offset against my Spanish tax liability (the DTA working in practice), but because the personal tax allowances in Spain are about half those of the UK, I pay a little extra tax here in Spain.

If CPR hasn't declared the disposal to HMRC (they haven't said they are unaware of the new rules), then they need to deal with that as a matter of urgency, but that doesn't mean the Spanish tax calculation is incorrect.  In their position, I would check with my Spanish tax advisor that they have taken account of the new UK rules.

Kind regards,

Kim

I think we are finally all in agreement about the best way forward.

It would be very helpful if CPR2020 could post the advice you get from a UK accountant to help clarify how the new rules work.  It may well make it easier for Spanish residents to sell property in the UK now, whereas the advice in the past was 'don't do it'.

If it was your main residence then no if it was a second property then yes 

Theirs no capital gains tax payable in .uk on prime residence only if you let it out and bought a spanish house first

HI we sold it first to buy the spanish house