Second home in UK - tax implications etc.?

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Miro
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Second home in UK - tax implications etc.?

Postby Miro » Fri May 29, 2015 8:52 pm

With interest rates heading closer to negative territory, and UK house prices seemingly on the up, it occurs to me that maybe it would make sense to "invest" in a future home there now, on the off chance that we might find a buyer here sometime in this lifetime and finally get to return to Blighty.
I'm sure the answers have been covered here at some time, but I can't find them so....

1) if you sell your primary residence in Spain and reinvest all the proceeds in another property elsewhere in the EU (i.e. UK) does the CGT exemption apply? (Or is Spain not part of the EU for that purpose, i.e freedom of movement of people and capital?!)
2. if yes to above, can you claim a property bought before you sell the first one as your new primary residence, to get the exemption?
3. if you own a property in the UK whilst still a tax resident in Spain, how is the second home "imputed income" tax calculated?
4. am I bonkers to even be considering this? We would not be looking to rent the UK property out, and would therefore still be liable for council tax etc., the property would be sitting empty...unless we left the place here empty and the keys with an estate agent, god forbid...
Any thoughts appreciated!
Don't worry about what people think, they don't do it very often

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El Cid
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Re: Second home in UK - tax implications etc.?

Postby El Cid » Fri May 29, 2015 10:19 pm

If you reinvest the proceeds of your habitual home in Spain in a new habitual home in the UK within 2 years then you will get the exemption. The key is that the new property must be your new habitual residence and that means you must live in it and be tax resident in the UK which seems to contradict your plans to leave it empty.

The only way you can buy first and sell later is to buy the new property with a mortgage and then pay it off with the proceeds of the subsequent sale. If you fund the purchase from your own funds, then that cannot be considered as a reinvestment.

If you buy the property in the UK as a second home, then the imputed income tax will be the same rate as it would be on a Spanish second home. The difference is that in Spain, the value of the property for tax purposes is based on the Catastral value. A property in the UK will not have a Catastral value so the tax is based on 1.1% of half the original purchase price.

Is it a good plan - I couldn't possibly comment - only you can make that decision.

Sid

Miro
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Re: Second home in UK - tax implications etc.?

Postby Miro » Fri May 29, 2015 10:28 pm

Thanks very much Sid, as always, excellent info.
Plenty to think about
Don't worry about what people think, they don't do it very often

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Martin Page
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Re: Second home in UK - tax implications etc.?

Postby Martin Page » Sun May 31, 2015 11:52 am

If your thinking of eventually returning to the UK, and you do buy a property over there, maybe you should reconsider your permanent residency in Spain at the same time ?

infoseeker
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Re: Second home in UK - tax implications etc.?

Postby infoseeker » Sun May 31, 2015 12:34 pm

Martin Page- how can you consider your residency in Spain?If you are resident here, you cannot call yourself non resident, unless you spend under the required number of days in Spain
Can you clarify your comment?

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Re: Second home in UK - tax implications etc.?

Postby infoseeker » Sun May 31, 2015 12:40 pm

If you have no cgt to pay when you've soldyour house, being over 65, tax resident, lived in Spain 3 years, and show the notary your tax certificate, what do you do then, if anything.
Do you have to back it up with a claim within a certain time?

El Cid
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Re: Second home in UK - tax implications etc.?

Postby El Cid » Sun May 31, 2015 2:02 pm

As far as I am aware, if you are over 65 and it qualified as your habitual residence, you don't have to declare it on your tax return.

Sid

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Re: Second home in UK - tax implications etc.?

Postby infoseeker » Sun May 31, 2015 3:12 pm

Does it make any difference if you go back to the UK to live afterwards ?

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Martin Page
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Re: Second home in UK - tax implications etc.?

Postby Martin Page » Sun May 31, 2015 4:07 pm

Assuming that you have taken permanent residence in Spain .... you can, At any time, Unregister as being a permanent resident ... IF you spend more than the required 163 days a year outside of Spain .... You only have to be resident in the UK for 3 months and you become liable for UK TAX.

You will still have to pay the NON residents TAX in Spain , but a much more simplified tax return.

You can spend half your time here and half your time in your UK house.

infoseeker
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Re: Second home in UK - tax implications etc.?

Postby infoseeker » Sun May 31, 2015 4:19 pm

but if someone goes back to live permanently in UK after spending 183 days in Spain, ( therefore considered tax resident for the whole year) having given their tax certificate to the notary to exempt them from cgt, what happens then?

El Cid
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Re: Second home in UK - tax implications etc.?

Postby El Cid » Sun May 31, 2015 4:30 pm

Martin Page wrote:Assuming that you have taken permanent residence in Spain .... you can, At any time, Unregister as being a permanent resident ... IF you spend more than the required 163 days a year outside of Spain .... You only have to be resident in the UK for 3 months and you become liable for UK TAX.

You will still have to pay the NON residents TAX in Spain , but a much more simplified tax return.

You can spend half your time here and half your time in your UK house.


First, it's 183 days outside Spain in one calendar year not 163.

Yes, you can be deemed tax resident after as little as 10 days in the UK under the new rules but 90 days is more usual.

Just because you are deemed tax resident in the UK under the 90 days (or less) rules does not mean that you are not tax resident in Spain. You can be tax resident in both countries, but the DTA decides who you pay tax to.

If you spend half your time in the UK and the other half in Spain, then, as there are an odd number of days in a year (leap years excepted), you must end up staying in one country for more than the other. That will normally take precedence under the DTA unless there are other complications such as where the family live but again the DTA decides it.

Sid

El Cid
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Re: Second home in UK - tax implications etc.?

Postby El Cid » Sun May 31, 2015 4:32 pm

infoseeker wrote: having given their tax certificate to the notary to exempt them from cgt, what happens then?


It doesn't exempt you from CGT, it just exempts you from having to have a retention made on the sale price. Whether you pay tax depends on your age or whether you reinvest the proceeds.

As you are over 65 you do not have to declare the gain on your tax returns, so, basically, nothing happens.

Sid

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Martin Page
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Re: Second home in UK - tax implications etc.?

Postby Martin Page » Mon Jun 01, 2015 10:01 am

Sid ... don't exclude holidays when your out of both countries .....its not an either/or situation down to the exact day

El Cid
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Re: Second home in UK - tax implications etc.?

Postby El Cid » Mon Jun 01, 2015 12:03 pm

No, it's not as binary as it looks. More than 183 days, usually result in residency, but even with a much lower figure, other factors come into play, which could still result in being deemed tax resident.

Eventually, if there is doubt, the two tax regimes decide between themselves.

Sid


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