[Question] Capital Gains on sale of UK Property

[Mike Simmonds]

I have a South African client who after studying, started working in the UK and while resident and a UK Taxpayer bought a 50% share in a residential property, which was also his primary residence.

3 years ago he left the UK to become a South African resident Taxpayer.

The UK property was then rented to tenants and UK tax returns submitted disclosing the relevant income and expenditure. This was done vis his personal UK Tax Return. Nothing was disclosed on the SA Tax returns.

In March last year he sold the UK Property and transferred the bulk of the proceeds back to South Africa.

Currently that is until next month (April 2015) there is no Capital Gains Tax in the UK in relation to non-UK residents who own residential property, therefore he is not liable for Capital Gains in the UK.

My question is to what extent is he liable for Capital Gains in South Africa? Would it be only for the time that he was a South African resident?

[Houses4Rent]

I am guessing here, but from what I hear RSA has a double taxation agreement with UK. As a RSA taxpayer has to declare global income. So your friend has to declare in the UK and RSA. However the tax will not be doubled up due the agreement. Lets say the tax rate in UK is 10% and 15% in RSA. He will pay the 10% in UK and the balance of 5% in RSA.

Is there anybody more knowledgeable than Mike and me maybe?

[CLIVE-TRIANGLE]

It is essentially the same as a local disposal.
There are a number of complications:
First would be to work out the fraction applicable to the primary residence. This should be done on a time basis.
The second would be the exchange rate. Base cost and proceeds should be at the same rate; that ruling at the time of sale.

Have a look at that portion of the return:

[Mike Simmonds]

Thanks Clive

Appreciate the input. Would the Base Cost be the value at the time that he came to South Africa and chose to be resident?

[Mike Simmonds]

I am guessing here, but from what I hear RSA has a double taxation agreement with UK. As a RSA taxpayer has to declare global income. So your friend has to declare in the UK and RSA. However the tax will not be doubled up due the agreement. Lets say the tax rate in UK is 10% and 15% in RSA. He will pay the 10% in UK and the balance of 5% in RSA.

Is there anybody more knowledgeable than Mike and me maybe?

Thank you Houses4Rent remember that, Currently that is until next month (April 2015) there is no Capital Gains Tax in the UK in relation to non-UK residents who own residential property, therefore he is not liable for Capital Gains in the UK.

[Houses4Rent]

Well, I guess its 0% in the UK then and all of the applicable % in RSA then.

[CLIVE-TRIANGLE]

Thanks Clive

Appreciate the input. Would the Base Cost be the value at the time that he came to South Africa and chose to be resident?

The base cost will be at the time of disposal, at the same exchange rate at which he received the proceeds.