TAX AVOIDANCE

[alisdair4]

Can anyone tell me if it is possible to avoid capital gains tax by nominating a boat as your primary residence? I intend to sell a house to buy a boat on which to live in the next 1-2 years, but, in common with many, stand to be hammered by CGT if I do not buy another house within 6 months of selling the old one.

Any advice gratefully received.


<hr width=100% size=1>"so long as all you want is a penguin’s egg"

 

[DavidJ]

A friend of mine has just sold a house to live on a narrow boat. From what you say he may be liable but CGT on what? the increased value of the house since he bought it 4 years ago.?

<hr width=100% size=1>

 

[mikewilkes]

Are you sure you are "elligible" to pay on disposal of your prime residence?
Is it not only on a second / rental / tourist let jobbie that is CGT' able?

<hr width=100% size=1>

 

[Sea Devil]

For several years my boat was my residence and I was non resident in the UK and the inland revenue accepted that fine... They have quite a lot of resident UK citizens living permanently in boats as well as lot of Non Resident UK citizens living in boats in various locations. I was surprised but they accept this as a normal event.


<hr width=100% size=1>If you have time visit my web site
www.michaelbriant.com/sailing

 

[mikewilkes]

As a follow up I believe the time scale for " rolling over" money from business ie rental is 12 months - but there again an accountant is needed to answer the in depth questions relating to taxation.

<hr width=100% size=1>

 

[Sea Devil]

Mike is right I am certain,
you only pay CGT on 2nd homes never on your personal home/residence. There is no requirement to buy again if you sell to avoid CGT.

<hr width=100% size=1>If you have time visit my web site
www.michaelbriant.com/sailing

 

[cliffb]

I'm no accountant...but my understanding is that if the house you're selling is your 'primary residence' then there's no CGT to pay...unless it's a company owned house possibly. As for a boat being your primary residence....I have to admit I don't know how they view this one, and Bambola's post is most interesting.
I have been thinking about this myself recently, and wondering if, by living on a boat and retaining UK residency one can also take interest from offshore bank accounts free of income tax. For the avoidance of doubt... what I'd like to do is hold 'offsore' bank accounts, take the interest free of UK tax ('cos it's only taxable on repatriation), and remain a UK resident for state benefit purposes. Anyone know if this is possible?

<hr width=100% size=1>

 

[Sea Devil]

You can certainly claim unemployment benefit living on a boat in the UK - I knew lots who did.
not sure if you can do that if you are in another euopean country as to claim their benefit you would have to be resident there and then pay their tax on overseas investments and that would vary enourmasly.

you can certainly be non resident and not pay tax on offshore investments (provided the boat is indeed overseas anywhere) You can certainly have your pension paid to you in the boat overseas. I have been non resident for years with all the advantages but do pay tax on all monies I earn in the UK via... what ever but do not pay tax on overseas income .... This has been my experience but I have always been self employed and my accountant set it up...


<hr width=100% size=1>If you have time visit my web site
www.michaelbriant.com/sailing

 

[alisdair4]

Wow - obviously a popular topic! The house I would be selling is currently rented, so may be seen by HMIT as a business (which of course it is). But it is also my prime residence in UK. Sounds like this may be worth a few quid spent on an accountant..! Thanks for all who have replied.


<hr width=100% size=1>"so long as all you want is a penguin’s egg"

 

[cozy]

I believe that even if the home that was your primary residence is now rented out, it can still be treated as your primary residence so long as it was your home during the preceding three years. At least, that was certainly the case when I found myself in that position two years ago. This post carries the usual "I'm no accountant, might be wrong" caveats etc etc."

Effectively, I had to sell my property before it started to lose its CGT exemption.

<hr width=100% size=1>

 

[tcm]

Re: eh?

your primary residence is exempt from CGT. No need to buy another, ever.

er ....Are you UK- resident ? US has CGT as well dunnit?

<hr width=100% size=1>

 

[cliffb]

Bambola... So how do you actually get the income from offshore interest into your pocket in the form of cash? Do you have another account, (a current account, for instance) in another country and then have to go there to draw the cash? And if so, which country? Or can you possibly just draw cash on the foriegn bank from wherever you are? Again.. which bank which country? I know that Monaco doesn't have any income tax, but most others do, as far as I'm aware. Or is it the case that it can be any country so long as you're not a resident of that country?
Moving on from that... when I spoke about state benefits I was thinking more along the lines of UK state pension (which you answered, thank you) and National Health. I have a long term plan to liveaboard away from the UK but am cagey about losing residency. At some stage I'd want the option to come back and have the state look after me when I'm old and decrepid!

<hr width=100% size=1>

 

[Metabarca]

I can provide an answer to one of your points here: Monaco is indeed income tax-free but only to resident non-French individuals. Residence requires either a) loadsadosh or b) work in the principality supported by a contract. First you get French residence, then apply for Monegasque. To maintain residence, you must spend about 250-300 nights a year there and they DO check up (phone-taps, concierges-spies, etc. I know: I lived there!) In other words, probably not a solution for you.


<hr width=100% size=1>Adriatic links here: <A target="_blank" HREF=http://www.comoy.com/saillinks.html>http://www.comoy.com/saillinks.html</A>

 

[Sea Devil]

For about 12 years (I am a free lance TV director working in various countries) I live aboard my boat out of UK waters - it works like this (although for goodness sake check with an accountant) - I am non resident - cannot spend more than 90 days in the UK in any financial year(small variations on that but basicly that's it)

I have normal UK bank accounts - they pay interest, tax free, because of my non resident status - likewise offshore accounts pay into my uk bank - (you have to fill in a couple of forms for the bank to pay interest gross.)

The problem of getting your hands on the dosh when in a boat travelling from country to country - is solved by haveing a pocket full of UK credit cards that automaticly debit your bank account with the FULL amount each month - no interest charges (need to set this up before you become non resident) Any big item you just buy on the cc. Cash comes out of the wall all over the world. much the cheapest way and best rate on the day.

(Health care is the only fly in the ointment. I had a major major gall bladder operation in Phuket Thailand - private bill £7,000 but 80% of that was paid by the French Social Security system)

Because I never stayed in any one country very long - some months normally - I never clocked into any local system - this also means you cannot get support from them but always remember - if the worst happens - jump on an airplane - arrive in the UK and declare you are no longer non resident and you are back in the system.. I think...

Now I am a French resident - I have a 'carte de sejour' and I pay into the french social security system - brilliant - I pay UK income tax on all money I earn in the UK of course. Do not pay tax on monies earned outside UK except in France I am required to pay tax on all monies earned in France and overseas except the UK where I have already paid.

does that help - there are some real accountants on the forum who are much better qulified than me to post on this subject and will hopefully correct me.

<hr width=100% size=1>If you have time visit my web site
www.michaelbriant.com/sailing

 

[cliffb]

Bit late on posting this one...sorry.
Bambola..thanks for your last post. Most interesting. But now you're resident in France is your UK interest still tax free? Don't the UK and France have some reciprical arrangement?
PS... visited your site. How on earth does SWMBO let you get away with it! Being away so much, that is?

<hr width=100% size=1>

 

[Sea Devil]

Only became a french resident last year... because I am non resident the Brits IR allow me to have all interest tax free but of course I pay normal income tax on my UK earnings. One of the strange perks -

related to the boat there are some issues. I think that if you are not a resident of the UK you cannot be registered as a british ship blue book or ssr. That is a problem you have to sort out - Register somewhere else - no big deal - Then the radio authorties cannot require your licence fees or control you - think that's right but I am sure the forum will tell you.

The French IR ask me to declare on my honour my net UK and Overseas income in order to acess my social security contributions and one of the two housing tax. At the moment EU works on people being taxed in their own country on their earnings in that country - you cannot be taxed twice on the same money.

I still pay tax in the Uk - run UK bank accounts and it was always in my mind that if I was seriously ill/in trouble I would get on a jet plane to the UK and become instantly a resident again.

How do I get away with the sailing - She joins me in the nicer places when I've done the passage - e.g. to tobago £200 return charter rather more to Cairns a couple of years ago but she enjoyed Aussie, was bored with Indonisia, loved malaisa and was scared by the pirates!

If I can help more come back do....
regards

<hr width=100% size=1>http://www.michaelbriant.com/sailing

 

[piscosour]

Sorry I'm late, I've been away. I am not an accountant but I can say categorically that a UK resident will not pay CGT on his\her main residence. If you rent the house out it becomes a business and you will pay CGT on the increase in value from then until you sell it. However you are allowed to rent the house out while you market it with no loss of "principal main residence status" this is sure for the first year and by negotiation with your local HMIT for the second, you may even get away with it for the third but doubtful. If the house is a second property it will be treated as a business and CGT will be payable on the increase in value, but you do have allowances and taper relief to reduce the bill. If you sell the business asset and apply for rollover relief it needs to be a similar asset, which a boat is not. I understand that a houseboat, ie. fixed mooring, counts as a residence boat a moveable boat does not. This is of course my opinion, advice from an accountant would be sensible.

<hr width=100% size=1>

 

[pragmatist]

You say that if you rent your main residence (while of course swannin' around on the boat for a year or many) that you pay CGT on the increase in value until you sell it. Does this imply that the status of the house has changed in some way from residential to a business property ? What happens for example of you finally hang up your anchor and return to the house to live on land ?

(And sorry if I'm late on this one too - that nast 4-letter word beginning with W keeps getting in the Way !)

<hr width=100% size=1>a pragmatist is an optimist with a boat in the UK - but serious about not being in the UK !

 

[Sea Devil]

in my experience the IR will accept a boat on the move as being your residence. They did/do with me.

Not certain if that would apply to a UK home property owner with UK residence but the IR obviously have lots and lots of liveaboards on their books and understand the problems - It is possible to talk to them ....

You can certainly go off sailing out of UK waters and let the (Home) house for gain and just pay the normal tax on the profit... When you get home you just move back in - no problem.

Supposing some time later you decide to sell - a few years later - then I THINK theoretically you should inform the IR of the period the house was rented out for and then pay a certain amount on that period only... I think the reality is that you just sell because the system is really only geared up for buy to let type property.

<hr width=100% size=1>http://www.michaelbriant.com/sailing

 

[piscosour]

In theory, yes. Whilst the property is let out it is treated as a business and any gain is subject to CGT. However you would need to have a valuation done when you move out and when you move back. When you eventually sell the house you would have some CGT to pay. If only for a year you would most likely get away with it, but for longer you would need a word with the local inspector. Assuming the house was on the market, even if you didn't really intend to sell, you probably wouldn't have a problem for two years. You may consider an optimistic valuation at the start of your break followed by a pessimistic valuation at the return giving a modest increase and then divide the gain by you and partner with two sets of CGT allowances £8,200 gives a gain of £16,400 before you pay tax. Of course you may be better selling the house and buying a newer/bigger/better boat. A word with your local tax office beforehand may save you a lot of hassle. Also it is worth remembering that residence status and CGT on a principal main residence are two seperate things in the eyes of the taxman.

<hr width=100% size=1>