Selling a house in the UK from Germany

125 posts in this topic

@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!

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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.

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@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.

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@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!!!

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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!

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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.

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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!!!

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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!

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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!!

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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!!" :lol:

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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?

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@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!!!

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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

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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).

@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!!!

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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)

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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. :angry:

 

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.

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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).

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