Capital gains tax

[keving]

Hi all,

looking for advice re CGT where a share in a house is gifted to a child.

My son and I jointly (50% share each) bought a property in Cyprus in October 2012 at market value.

In June 2017 I gifted my 50% share to my daughter.

They are now looking to sell. Neither I or my children have ever lived in the house on a permanent basis.

As far as my son is concerned I understand that his CGT will be based on:

50% of: selling price less selling costs (legal, estate agency, 0.4% tax, etc)

less 50% of: total acquisition cost (price paid in 2012 + transfer fees, legal fees etc) uplifted by change in CPI from October 2012 to date of sale in 2025

less allowance of 17,086

= liability for CGT at 20%

With regard to my daughter, she acquired her share of the property in June 2017 at a cost of €900.

Does she need to ascertain 50% of the property's market value in June 2017 and add on her costs of €900, with the indexation allowance being based on the change in CPI from June 2017 to 2025?

[Nigel Howarth]

Hi Kevin

I see you joined on Jan 18, 2012 when you were buying the house.

As for your daughters CGT allowance. As you gifted it to her she will pay CGT at the rate of 20% based on the market value of her share in the property when you bought it back in 2012.

You'll find an on-line CGT calculator at https://www.zyprus.com/capital-gains-calculator . Like your son, she'll have a CGT allowance of €17, 086 plus her allowable expenses.

I forgot to ask - does your son & daughter have the deeds to the property?

Regards,

[keving]

Hi Nigel, thanks for your quick response.

Yes they both have the title deeds.

A couple of supplementary questions, if I may.

When the house is sold, will they each receive some form of statement from the Cyprus tax department showing the amount of CGT that each has paid individually?

I presume that they will each pay an identical amount of CGT?

I guess they will need some sort of statement to try and get a reduction in UK CGT, which they will undoubtedly have to pay.

However, as it stands, my daughter's estimated UK CGT, using the Gov.UK calculator, is significantly less than the Cyprus CGT she will have to pay.

I know there is a double taxation treaty which is meant to ensure that you are not taxed twice, but how does it work in practice? I assume the UK liability can be reduced by the amount of tax paid in Cyprus, but does it work the other way around - i.e can the Cyprus liability be reduced by the amount of UK tax charged?

[keving]

Hi Nigel, thanks for your quick response.

Yes they both have the title deeds.

A couple of supplementary questions, if I may.

When the house is sold, will they each receive some form of statement from the Cyprus tax department showing the amount of CGT that each has paid individually?

I presume that they will each pay an identical amount of CGT?

I guess they will need some sort of statement to try and get a reduction in UK CGT, which they will undoubtedly have to pay.

However, as it stands, my daughter's estimated UK CGT, using the Gov.UK calculator, is significantly less than the Cyprus CGT she will have to pay.

I know there is a double taxation treaty which is meant to ensure that you are not taxed twice, but how does it work in practice? I assume the UK liability can be reduced by the amount of tax paid in Cyprus, but does it work the other way around - i.e can the Cyprus liability be reduced by the amount of UK tax charged?

[Pantheman]

The CGT liability is on the property.

It will be calculated as follows:

Selling price minus

Price paid when the property was bought in 2012
+ Indexation from that date to present when sold
+ agency fees
+ legal fees
+ Transfer fees when you first bought it
+ 0.4% refugee tax
+ 2x 17,086 allowances

What ever is left it will be taxed at 20%

The proceeds will be share equally between your son and daughter

Of course you will get a tax receipt for the amount paid, they are not treated individually.

As far as I am aware, once you pay the CGT in Cyprus there should be non to pay in the UK. Tax rate here is 20%, I think the UK is 19%??

In any case I have never heard of anyone paying UK CGT once they paid it here. If the tax man asks you can offset ANY UK CGT with what you paid in Cyprus.

Good luck

Where is the property based?