Budget 2010: CGT and Expats


Prior to last week’s emergency budget there was much talk about Capital Gains Tax (CGT) and the raises we expected. Looking at Nick Clegg’s Lib Dem policies we suspected that CGT would see a dramatic rise, bringing it in-line with earnings and thus giving the potential for some people to have CGT bills charged at 50 percent rates, at the highest.

Luckily we turned out to be mistaken, Chancellor George Osborne decided against the planned raise and opted to keep the basic rate at 18 percent, and charge people on a high rate of tax with a slightly higher rate of 28 percent. Bucking against trend, the change comes into effect straight away, as opposed to the start of the next tax year.

But what of British people who now live abroad, are expats subject to CGT? Of course this comes down to the age-old expat conundrum, are you still classed as a resident of the UK? If you have any strong connections to the UK then you will probably find that you are liable to pay CGT.

If you have stayed away from the UK for over five years and are seen as a non-resident then you will be free of any CGT burden in the UK, even if you gain profits from assets sold in the country. You can also avoid CGT if you have a full-time work contract abroad, work which does not require any activity in the UK.

Problems could arise if you have a business that still has dealings in the UK, or if you have a home that you are renting out. CGT specialist Mike Warburton, of accountants Grant Thornton, says: “If you’ve been abroad for at least five years, sell it before you return to the UK to escape CGT. If you come back within five years, live in it again before you sell it. As long as it’s your main home you’ll get a number of reliefs: it is exempt from any gain during the time you lived there, plus another three years when it was let out or it was empty and you get letting relief of £40,000 each. So you’re unlikely to have made enough to have to pay CGT.”

If you split your time between the UK and another country, as many expats do, then you should know that any money you make from selling holiday homes or other assets, such as foreign shares, will be subject to CGT. In this case you may also have to pay CGT in the other country too.

OAPs with assets to sell could find themselves on the wrong end of the 28 percent rate, even if they are basic rate taxpayers. If the profits reaped by a pensioner push their earnings over £43,875 then they will be subject to CGT at the higher rate.

However, if you are not domiciled to the UK, then you can avoid CGT altogether, even if you are a resident. The canvas of domicile status is never black and white though, it can often take a lot to convince the courts that you are a ‘non-dom’, as evidenced by the recent case of Robert Gains-Cooper. He was found to be liable for decades of backdated tax after a judge decided that even though his life was in the Seychelles, he still had ties to the UK significant enough to warrant taxation.

If you are an expat and are interested in learning more about CGT, or simply want advice with regards to managing your finances abroad, speak to an IFA.