Gifts & UK tax

[Needgoodnews]

Good evening folks

Hoping for some good news

I was gifted our family home in Cyprus just over 12 years ago in Paphos and am trying to find out the implications of being a UK tax resident (own a home here) and CGT and how it works when a property was gifted.

I am a higher rate tax payer in the UK so I believe I would pay Cyprus CGT on the profit hoping for around €100k profit (sale price less purchase price) at 20% and then would need to declare this in the UK and then pay the extra 8% in the UK as if it was a UK property I would need to pay 28% CGT, please correct me if I’m misinformed. Do you get a statement from Cyprus (detailing profit & CGT payment) on what has been charged etc to then submit in the UK?

I did consider trying to avoid the CGT in the UK at all by living in Cyprus under a nomad visa & Cyprus tax resident but I’m led to believe even if my Cyprus home became my main residence that when returning to the UK even in a different tax year from the sale (within 5 years) I would still get hit for the CGT tax?

I’m also trying to understand the gift situation from a UK inheritance perspective? I was gifted the house in the April before my father passed away in the October, we sold this and bought something more suitable for my mum to live in as she was terminally ill. She then passed 4 years later. The purchase was in my name. Is there a UK inheritance tax implication even though there isn’t in Cyprus? It’s so confusing and so many different rules, I haven’t got a clue what to believe….

I’m planning to see a cross border tax accountant in the UK to help make sure I’m following the rules but was curious if anyone knows if any of the above is correct as no point going down the sale route if it’s going to be a nightmare tax wise, also curious if there is a better way to go about things?

Sorry for the essay, just hoping for some guidance to decide what the best course of action is?

Thank you in advance

[Nigel Howarth]

Hi Needgoodnews and welcome to the forum.

Under the provisions of the UK/Cyprus Double Taxation Convention. you will pay Capital Gains Tax from the sale of the property to the Cyprus Tax Department.

This tax will be based on the price paid for the family home when it was bought by its previous owner. (If it was purchased before 1980, the price paid will be assessed at the property's market value as of 1st January 1980.)

As well as inflation, the cost of improvements, legal fees, property transfer fees, registered estate agent fees, loan interest and other expenses can be used to reduce your liability. (You will need an accountant to work all this out for you.)

It used to be the case that as you paid CGT in Cyprus (the country in which the capital gain was made) you would not be liable for CGT in the UK. However, you are liable to pay CGT if you're a UK resident, but as you will be taxed twice (once in Cyrus and once in the UK), you will be able to claim relief in line with the UK/Cyprus Double Taxation Convention.

You will need a tax advisor to assess you UK liability.

Regards,