Selling a house in the UK from Germany

I want to sell my house in the UK.

I will need to have a solicitor sort out a few of the documents. Can I do all this via a solicitor in Germany, or do I have to return to the UK especially for this?

I dont know if anyone else has done something similar?

I appointed my father to act on my behalf. So I presume that you can do the same with anyone you like. I made a fortune... best thing I ever did.

G

I've just sold mine - contacted a solicitor in UK by telephone and then did all the other business by email. Only had to resort to mail once.

Good luck

no need to go in person - why don't you just use the solicitor who did the purchase for you? they tend to keep your file so have most of the docs handy --> cheaper if it falls thru and they send you a bill for each letter / call / nanosecond of thinking about your file

I thought about selling mine, explored the ins and outs and discovered that *any* profit you make on the sale will be treated as income by the German taxman and he will have his (large) cut.

I'd be delighted if someone told me this was not true, but I got advice from a top notch german accountant...

I should be ok, I am on an English contract for the next year and a half.

But I read a UK think tank suggested that to stem the inreasing house prices, they recommend the government put 40-50% tax on any profits people make from selling their house...bastards!!!

be real careful. if you are working here, more than a certain amount (I'd need to check) they will count you as tax resident. It's complicated as hell, very unfair but you need to be 100% sure! The last thing you want is a 'discussion' with the German taxman about where you should be taxed.

I checked;


I guess it depends if you are going back to the UK regularly, but if you add all the days up that you are physically here (over 12 months) it may present a problem. Best to be sure is all I'm saying.

check out http://www.inlandrevenue.gov.uk/

but basically if you are here for more than 6 months you should be paying german taxes not UK...

sorry, should have said with the web site, you should start by checking under "double taxation"

http://www.inlandrevenue.gov.uk/si/double.htm

good luck, its not that straight forward!

Give this guy a call. He is very straight and honest.

www.achillesaccountancy.co.uk or sam@...

He is my accountant, a God fearing man so please do not blaspheme. He will help if he can.

Good luck,
G

Hi all,
I wonder if anyone has been in this situation - we have decided to sell our house in the UK (various reasons) which means that we will be making a reasonable profit.
According to the UK tax rules, as we have lived in it in the previous 3 years prior to selling, it is not liable to Capital Gains Tax (40%!) as it was classed as our main and only private residence.
Today we discover that Germany does not recognise this English rule and therefore would (if we delcared the sale in our tax return) expect to take their slice (40%!!)
Our German tax adviser says that many English people in our situation do sell their UK property and don't declare it, but I was just wondering how high the risks of doing this are and has anyone been through a similar situation?
Is there any other way around this?

Thanks for any assistance!

Topics merged by admin

Do you have the legislation from the adviser? I have heard so many conflicting views on this and no one can give an answer pointing to the legislation.

@Ratboy,

Do you really think that the german civil service sit around checking house sales in every country just in case someone who is living there has to pay 40% tax. 2nd how would they found out anyhow...since there is no ID number on your name - so Mary Smith could be 1000s of mary Smiths in the UK.

If you want to be sure not to fall foul of the rule - just leave the money in the UK bank a/c but if I were you I wouldn't worry.

I don't have the specific legislation, but our adviser says it is a small sub-clause which only applies to the UK and not any of the other EU member states.

@ Stanford

Part of the problem is that we have been renting the property out for the last 2 years and have been declaring the income to both the UK and German tax offices.
If we suddenly stop declaring this income we are worried that awkward questions may begin to be asked.

You do not pay tax on any gains made on your house in the UK. If you are liable for tax in the UK then you will pay it there.

I was in the same position and paid no tax as there was non-due. Yes the authorities here were fully aware as we transferred all the cash over here to purchase our current house.

If you could find out the sub clause I could look it up at work. My german colleague says she doubts it is taxable but needs to look it up. I will let you know if she gives me the details.

Re not declaring it, it would make me very nervous as I could lose my job over it if found out. Not to mention having to find the money to pay the tax (assuming proceeds reinvested in property here).

Personally I do not understand why only the UK should be taxed. It isn't equitable to tax someone on property they would not be taxed on in another European country especially since it had been a main residence.

@Ratboy,

Mmmmmm.that means it is not your primary resident so would meaning that you are liable for the capital gains as it is an investment vehicle.

I suggest you kick out the tenants and say you live there again for about 3 weeks as you sell it...and then it is your primary residence! And if Canaryman is correct then you are okay from both Tax authorities.

Edited: mellelisa,

Captial Gains tax is a variation of income tax - a progressive tax to share the tax burden. Should you be resident in a country it is incumbent on the authorities to charge it on all income/capital gains. If they didn't then it would become a tax loop hole and loads of rich germans would buy property in the UK!!!

Granted from a UK perspective it seems hard, but from a german perspective it is being fair to their populace (which you become one when you are resident) and not favouring the rich!!!

either I've misunderstood something or something doesn't fit here

@Stanford
That's just the point - under UK tax law we are exempt from CGT for the first 3 years irrelevant of the fact of whether we rent it out or not.
The UK still considers it as our main and only place of residence.

Unfortunatley the German tax office does not appear to recognise this and therefore say its a taxable income as it is not taxed in the UK and therefore does not fall under the double taxation rule.

I hate tax and all the laws that surround it!

The 3 yr rule you are talking about is that you can live in a property as your main residence and it is capital gains tax free. Then you can move out for ANY reason and for the next 3 years it is still tax free. After that is is taxed proprotionally with regard to the length of time owned as main residence and the time it was not.
However there is also letting relief which can apply to reduce CGT made on a property let out.

Stanford, rich Germans couldnot just buy in the UK and benefit from this rule as they would not have had it as their main residence.

@Ratboy
Unfortunatley the German tax office does not appear to recognise this and therefore say its a taxable income as it is not taxed in the UK and therefore does not fall under the double taxation rule.

This what confuses me. I think it is taxable in the UK but at zero rate due to it being your main residence, which to me, would then mean it should fall under the DTT.

@Ratboy,

UK doesn't really have residency laws...so anyone can say that the UK is the main residency. Well what I mean is there is no registration - so no real proof.

The International Tax laws are based on physical presence 183 days once you are in that country for over 182 days you are considered resident.

The good or bad thing with this rule is proving where you were!!! Since the UK has open borders and doesn't clock people in or out. I think since you are paying tax in Germany - the German authorities are assuming that you are in their country for the 183 days - so their's for the taking...!!

It sounds like you need to get a good tax laywer/account - who can sell the house into a trust for your kids in an offshore a/c or something...!!!

Good look with working it out.

Edited. Mellisa,

As pointed out above - there is not registration in the UK - so proving main residence is hard - if not impossible! And since their are open borders you can't even prove how long someone was in the country. It would be easy to get around and if it wasn't so easey to do - along would come some companies to help the germans to do it!!!

By the way, their are tax laws that allow rich people earn money (tax free) in the UK along as they are their for less than 90 days (not including travelling days). So there are many tax exile living in Monaco etc and working in London nowadays!!!

I would say just go for it, don't declare, and see what happens

This is where a Swiss bank acc would be useful..

They have no tax affiliations with the UK nor Germany AFAIK.

Have the money droped into the Swiss account then take a long weekend away there.. withdraw what you need and come back nice and refreshed, with a bit of dosh in your pocket to boot!

Stanford I am not talking about your residency but the house you lived in. Principal Private Residence relief. You can prove you lived in the house as the bills for council tax will have been in your name, presumably you were paying UK tax and social security etc, neighbours could verify.
When you leave the UK you can also complate a form advising them you are no longer resident.

Mellelisa,

Maybe we do things differently - since at present I live in Manchester for residency work in London, but live in Germany for tax but pay my tax in the UK!!! Work that one out!!!

I'm saying it's easy to get round such problems and that the Tax office doesn't have millions of people running around checking them out and nor has the time or effort to fork out lawyers bills to get people for what is small change.

So, first you keep such things in your name and second to be resident you don't have to pay social security nor tax; otherwise kids wouldn't be resident. Not sure what kind of neighbours you have in the UK but mine don't give a fcuk and I'd luv to see some Tax inspector asking them if I was there or not!!!

As for that form about no longer resident - you don't have to sign it. I've never done it in over 15 years of going in and out of the country!!!

As I said, these are easy get around all these things but if you are talking about following rules then we are talking chalk and cheese as I'm talking about bending rules and how easy it is!!!

Stanford it is my job to avoid tax but not to evade it! I have dealth with the UK authorities enough to know that they can and will conduct an enquiry if they think something looks fishy. Not for small change but gains on houses can be significant. The problem is if you have been letting property out and someone else has had the council tax in your name, and you have been paying tax on rental income, it is pretty clear it is not your main residence. That isn't the issue though. the issue is whether it is taxable here in Germany, which no one seems to be able to answer definitively!

Many thanks to all who have replied and should anyone else have any further info./tips/possible loopholes then I would be extremely grateful.
As you can maybe understand, a majority of our equity is tied up in our house and to loose 40% to tax would be disastrous!!

I filled out a load of forms when I left the UK declaring that fact that I was off to live in Germany. The local tax office gave me a tax rebate !!! I have filled out all my forms over here to confirm my residency. Both the tax office in the UK and the tax office here know that I live here. I sold my house, have paid no tax at all and purchased a house here (for which I paid the tax).

The best bit about filling in my forms in Aylesbury was a young Pakistani chap who inspected the forms, grinned and said "Now you are going to be a bloody immigrant too!!"

Give me the sub clause (your adviser should provide a written answer which you can keep for future reference in case of any queries) and I will check it and with my colleagues. We aren't selling yet but we will bei n the future so obviously I have an interest in avoiding this too. I Imagine it applies to a lot of people on here!

Canaryman, you say the authorites knew but did you declare it on your form?

@Mellelisa,

I am not suggesting evade it and am saying let the lapse rules work for you!!! But if you've already started declaring things then naturally you are on a sticky wicket...as I said to Ratboy he needs to speak tax lawyer or accountant or move back into the house for a few weeks when he is selling it!!

GoodLuck Ratboy...

Moral of the story declare as little as possible!!!

My understanding of this after making a number of enquiries last year...

As far as UK Capital gains tax goes, if you are non resident when you sell you are not liable to pay capital gains tax in UK on any property, whether it is your main residence or not.

As far as German capital gains tax goes if you have owned a property for at least 10 years there is no tax on profit when you sell.

Now obviously I am not offering this as advice, merely sharing my understanding of the situation after making my own enquiries, but you may want to check this out for yourself as it makes a difference in terms of when to sell and where to be when you sell.

It is definitely worth seeing a Steuerberater about the German tax rules.

For quick and easy advice about the UK rules try

http://www.thefrygroup.co.uk/index.asp?sec...ageid=1&subid=1

@Canaryman,

I can imagine that they've got so many people coming in and out that they miss these things sometimes. It would be interesting to get an insider view of how the Tax offices work. If it is anything like the CSA (Child Support Agency) in the UK - I can imagine that they can be pretty much lapse at times.

Suppose it is to be expected when you are keeping tabs on 35 million people!!!

True BUT the German tax and customs office miss nothing. (They even told me we had to pay tax on a DVD import from the Jersey Isles although the package was stamped as tax paid in the UK at a cost of about 1.50 euros)

Lesson to us all -

German Tax Authorities and Customs mess with at your own peril!!!

As discussed here: Taxation Of Goods Delivered From UK to Germany.

Just a quick update on our situation with the German tax.
The lastest response from our tax accountant is as follows:-
"The period of 3 years starts at the date of the sale of your property. The property should be used in the last 3 calendar years exclusive for private living. As you have rented out the property since January 2004 you have not used the property only for private living in this period.

If you for example sell the property on September 1, 2006 you must have used the property in 2004, 2005 and 2006 for private use. Since you have rented out the house since January 1, 2004, the house is not exclusive used for private living and has to be treated as taxable income in Germany."

So it does looks as though we would be liable to pay German tax.

I still have to check into whether the UK tax office taxes any Capital Gain at 0% for the first 3 years and if so, will the German tax office allow this under the double taxation treaty. Doesn't look promising though.

http://www.hmrc.gov.uk/helpsheets/ir283.pdf

"Your period of ownership began on the date you first acquired the house...and ends when you dispose of it. The final 36 months of your period of ownership ALWAYS qualify for relief, regardless of how you use the property in that time, as long as the house has been your only or main residence at some point."

TCGA 1992 s223 (2)(a).

Thanks Mellelisa,
We are trying to use that UK tax clause to get around this but to do so I think we have to show that its a "relief" (ie. taxed at 0%) rather than an "exemption" to qualify under the double taxation legislation.

Will let you know if we succeed!

I have been looking at that aspect nyself as we have property in the UK too and would like to sell in the next few years. Sooner rather than later but so far everyone says, oh no, you have to keep it for 10 years.

Personally, my instinct is that it should be treated so as it IS taxable in the UK, and only due to this relief has it been exempted. I think it would be injust for Germany to tax it. However, finding the legislation to argue this is proving nigh on impossible despite being qualified and having umpteen friends in tax consultancy jobs mulling it over too. Do let me know if you can get anything concrete.

by the way, was your German adviser referring to German property with that 3 year rule above??

Mrs Ratboy here

Thanks mellelisa for your useful input. We now have one avenue left and that is the double tax treaty question. If that gain is taxable in the UK then germany will not tax us.

So is relief the same as not taxable, or taxable at 0% and therefore germany still can't touch it.

Our estate agent is going to measure up today so we are really short of time on this one. Causing way too much stress. Our german tax advisor is not the most clear in their explanations and seem to have no concept of UK tax which makes me think we have to do our own home work.

thanks everyone for the comments

http://www.users.dircon.co.uk/~ross/ger.htm#Article%201

Have a look at this. I am trying to find something further and have asked a few colleagues to look into it too.

Look at Article VIII and XII

Get some more tax advice. I would be very surprised if this is taxable here. Property rental income and Property capital gains taxes are as a general rule always fixed to the country the property is located.

Reason?

Well for example imagine if you had bought a property here in Germany, rented it out and it was liable for say €500,000 in tax upon the sale. So you decide to move to Gibraltar and sell the asset there. German tax boys would be mighty pissed off.

Although Germany taxes residents on their worldwide income, property is generally the exception and is taxed at its location. Also for example you should have been paying tax on your UK rental income to the UK tax authorities - not the Germans. (but still declare the income and possibly pay any extra here).

Ok something from a more authoritative source:

http://www.bundesfinanzministerium.de/lang...icationFile.pdf

then amended by

http://www.bundesfinanzministerium.de/lang...icationFile.pdf

Article VIII initally meant you were taxable here but it has been amended so that :

"Capital gains from the alienation of immovable property, as definied in paragraph (2) of Article XII may be taxed in the territory in which such property is situated."

Ok, so if it isn't taxable in the UK, can germany then claim something?

Or is private residence relief not considered untaxable but a zero rate tax and therefore taxable?

Della I THINK it is taxable but the amount payable is 0 due to the relief. I can't find anything to confirm this yet though. Also, I don't understand what you mean, saying it isn't taxable in the UK. From the double tax treaty it means it should be taxed in the country in which it is situated, which is the uk?

This is the latest advice we have been given and it details a small sub-clause that only applies to the UK out of all the member states of the double taxation treaty.

"You are regarded as treaty residents in Germany as you have your centre of vital interests here in Germany (economic and personal). Article XVIII Paragraph 2 relates to persons who are treaty residents in Germany.

It states in part a) that income from UK sources and from property located within the UK will be exempt from the taxable base in Germany as long as this income can be taxed in the UK according to this Tax Treaty i.e. that the UK has the right to tax the income.

However, it follows on by stating that the capital gain for which the UK has the taxation right will only be exempt from the taxable base in Germany if this gain is taxable in the UK (subject-to-tax clause). This is an exception to the rule. The exemption of this type of gain in Germany is on the premise that the gain is taxable in the UK (subject-to-tax clause). If the gain is not taxable in the UK, the gain will therefore be taxable in Germany due to this subject-to-tax clause."

although he did point out that many people do not declare sale of property in the UK.