2 Pages V   1 2 >   Reply to this topic

Capital gains tax on a UK property

To sell or not to sell!

Jburd
post 17.Mar.2016, 01:07 PM
Post #1
Joined: 9.Oct.2014

I'm moving to Sweden in July from the UK and I have a property here in the UK.

Ideally I'd like to keep my house in the UK and re-mortgage to buy in Sweden. The problem is, if I need to sell the UK property as a Swedish resident I know I have to pay CGT to Skatteverket .

Firstly would Skatteverket tax on the whole of the gains? (I bought it for £260,000 in 2012 and now it's worth £450,000). Or as I understand it, here in the UK (if I rent it out for more than 3 years) it's taxed from what it was worth when it stopped being my residential home and the gains after that (does that make sense?) i.e. if it's worth £500,000 when I sell, am I just taxed on £50,000. Also would HMRC take a cut too? What is the percentage of CGT in Sweden (I've tried looking it up and it's just a load of figures I don't understand!)

Another question. If I rent out the property in the UK can my mortgage re-payments be deducted from the Swedish tax bill? Again as I understand it that's now not the case in the UK.

Just really don't know what to do. Would it just be wiser to sell the UK property before I leave?

Has anyone else been in this situation?
Go to the top of the page
+
Essingen55
post 17.Mar.2016, 01:21 PM
Post #2
Joined: 12.Dec.2013

I am not sure that what you say is correct any longer. There is a new double taxation agreement between the UK and Sweden which applies from 1 Jan 2016. If I remember correctly, it says that all fixed assets like property are taxed in the respective countries. On this basis, whether or not you pay tax on selling your home in the UK would depend on the UK tax authorities and not the Swedish.

You need to find this document and read it.
Go to the top of the page
+
LLHope
post 17.Mar.2016, 02:00 PM
Post #3
Location: Stockholm
Joined: 1.Jan.2014

QUOTE (Essingen55 @ 17.Mar.2016, 01:21 PM) *
There is a new double taxation agreement between the UK and Sweden which applies from 1 Jan 2016. If I remember correctly, it says that all fixed assets like property are taxe ... (show full quote)

Incorrect.
The double-taxation agreement says that for immovable assets it "may be taxed" by the other member state. Whenever a double taxation agreement uses the phrase "may be taxed" it is giving non-exclusive rights to tax, whether they do or not ... but it is not stating that the state of residence cannot also tax the same item. WHat it means in this case is, UK have a non-exclusive right to tax (even if they do not tax it) and Sweden also has the right to tax as usual.
Go to the top of the page
+
yet another brit
post 17.Mar.2016, 02:25 PM
Post #4
Joined: 5.Jan.2013

To answer one of your questions, the CGT on property profit in SE is 22%.

You can choose to put the tax you owe into a higher-valued new property instead of giving it to the government, but you pay interest on the deferred tax, and have to pay it eventually! Given low mortgage rates, this may or may not be a good idea.

I'm fairly sure that you'd get treated as if it were a Swedish property - there is no concept of principal residence for CGT in Sweden (boo, hiss), nor do they care how it was financed. It is simply the sale price minus purchase price minus deductible costs (renovations & improvement, sales expenses) that is the taxed profit. Though if it should turn out that you made a loss, you do get a tax credit instead.

So yes, sell it before you leave :-)
Go to the top of the page
+
Jburd
post 17.Mar.2016, 04:25 PM
Post #5
Joined: 9.Oct.2014

Ok thank you. I've emailed HMRC to see what the deal is (probably take a year to reply!).

Another question:
If I do decide to keep it would I be taxed on the rent by HMRC or Skatteveret or both? And I know this is really naughty, but could I just keep my mouth shut and not let Skatteveret know about my property in the UK!?
Go to the top of the page
+
Essingen55
post 17.Mar.2016, 06:01 PM
Post #6
Joined: 12.Dec.2013

QUOTE
The double-taxation agreement says that for immovable assets it "may be taxed" by the other member state.


I stand corrected.

Given that they also use the term "may" in relation to pensions, am I right in thinking that any pension payments made from Sweden to someone who had decided to return to the UK at pension age would be made after the 20% sink tax had been taken off?

The UK now has a personal tax allowance of GBP 11,500 which is very generous. However, if Sweden takes a 20% tax cut on pension payments and you have no other sources of income from the UK, there is no way that someone returning to the UK could utilise their tax allowance because the over payment to Sweden could not be recovered. Is that a correct interpretation?
Go to the top of the page
+
LLHope
post 18.Mar.2016, 10:02 AM
Post #7
Location: Stockholm
Joined: 1.Jan.2014

QUOTE (Jburd @ 17.Mar.2016, 04:25 PM) *
Ok thank you. I've emailed HMRC to see what the deal is (probably take a year to reply!). Another question: If I do decide to keep it would I be taxed on the rent by ... (show full quote)
You are open to be taxed for income from immovable assets in both states. As for the 2nd part, tax avoidance is against the law, and if there is anything you learn in Sweden it is why the tax authorities here are the envy of Europe and considered one of the most efficient/effective public authorities in Europe! There is greater and greater exchange of information between countries in the hunt for taxable revenues, so it is very risky nowadays to keep quiet...be a good citizen and pay-up biggrin.gif

QUOTE (Essingen55 @ 17.Mar.2016, 06:01 PM) *
The UK now has a personal tax allowance of GBP 11,500 which is very generous. However, if Sweden takes a 20% tax cut on pension payments and you have no other sources of incom ... (show full quote)
If you become resident in the UK then you ARE taking advantage of the UK's tax allowance and that takes the income less tax paid in Sweden into account. Sweden is reasonable enough to only deduct SINK tax, though you can if you want choose to have the normal tax tables applied depending upon your pension-time income. What you cannot do, from what you imply, is have UK's tax allowance applicable to Swedish tax system ...as nice as that would be if possible. wink.gif
Go to the top of the page
+
yet another brit
post 18.Mar.2016, 11:56 AM
Post #8
Joined: 5.Jan.2013

QUOTE (Jburd @ 17.Mar.2016, 04:25 PM) *
If I do decide to keep it would I be taxed on the rent by HMRC or Skatteveret or both? And I know this is really naughty, but could I just keep my mouth shut and not let Skatt ... (show full quote)


Well, if you are resident and own a property abroad, then Sweden would tax it as if it were in Sweden. I beleive that the HMRC would leave you alone, but maybe not. You'd have to ask them.

If the property counts as "rental of a private residence" (which in effect means that you can claim that you will live there again in the reasonable future), you can deduct a fixed sum (40kSEK) and deduct 20% of rental income from the total rental income, and you then pay tax (30%) on the profit.

If not a private rental then the property rental is considered to be a commercial activity, and I think you can voluntarily choose to declare it as such. Then the rules are a bit more complex. You can deduct interest and costs from income, and have to (effectively) pay for a benefit-in-kind of any time you may have used the property yourself (think of owning a flat somewhere sunny that you use yourself for part of the year and rent our the rest).

Here is the link to Skatteverket on the subject - http://www.skatteverket.se/download/18.3aa...24919/39815.pdf

Could you simply not tell them? Sure, and I'm not sure they would ever find out. Or you could "sell" it to your best mate in the UK and enjoy a succession of brown envelopes. Both would be illegal though!
Go to the top of the page
+
runninghook
post 2.Jun.2016, 05:08 PM
Post #9
Joined: 2.Jun.2016

has anyone heard of anyone being found out? seems near impossible to find out what tax information is swapped between coutries
Go to the top of the page
+
Genaro
post 4.Jun.2016, 07:43 PM
Post #10
Joined: 30.Mar.2015

QUOTE (runninghook @ 2.Jun.2016, 05:08 PM) *
has anyone heard of anyone being found out? seems near impossible to find out what tax information is swapped between coutries


Tax and benefits information is routinely exchanged between HMRC and Swedish authorities including Skatteverket. I've got first hand experience of this. My advice would be to play a straight bat on this and pay your dues to the applicable national authority in full.
Go to the top of the page
+
LLHope
post 5.Jun.2016, 10:24 PM
Post #11
Location: Stockholm
Joined: 1.Jan.2014

QUOTE (runninghook @ 2.Jun.2016, 04:08 PM) *
has anyone heard of anyone being found out? seems near impossible to find out what tax information is swapped between coutries
QUOTE (Genaro @ 4.Jun.2016, 06:43 PM) *
Tax and benefits information is routinely exchanged between HMRC and Swedish authorities including Skatteverket.
Not only between UK and Sweden, but other EU Member States also. And it has just been enhanced to also include financial accounts, balances, interest received, dividends etc... Check EU Directive 2014/16/EU which came into effect from 1st Jan 2016.

Not only that but there are more and more agreements being made between countries to share information on who holds safety deposit boxes, and you will also find that during the last few years the rules have been changing in many banks with respect that you are not allowed to store cash or valuable assets in the safety boxes.

Governments have wasted so much tax payers money, especially bailing out failing economies and financial institutions that they now have to hunt down everything can be taxed and will be taxed or taken!
Go to the top of the page
+
Donut
post 6.Jun.2016, 10:11 AM
Post #12
Joined: 3.Sep.2015

Look at Skatteverket website for uppskovsbelopp. A house in the EU is treated the same as in Sweden. You can defer up to 1.45 MSEK of the capital gains and pay 0.5 percent tax on it each year instead. But it has to be considered a private property ie you need to have lived it in with the last year before you sold it, or 3 of the last 5 years. For anything over the threshold or if you don't meet that criteria, the full capital gains tax is due. Of course, if you defer the capital gain, it will still need to be paid eventually.
Go to the top of the page
+
Renfeh Hguh
post 12.Jun.2016, 07:54 AM
Post #13
Location: Not in Sweden
Joined: 1.May.2005

You need to protect the capital gain you have made up to the day you become resident in Sweden and you should be able to do that.

Try contacting Skatteverket, maybe you'll be lucky otherwise find a good tax accountant.

Regardless of what advice you get now, you should get an official valuation of your property as of your move date. Perhaps even get several valuations and keep the highest. It may become invaluable one day when it comes to selling and dealing with Skatteverket
Go to the top of the page
+
Donut
post 12.Jun.2016, 09:30 PM
Post #14
Joined: 3.Sep.2015

@renfeh I dont think you can only pay tax on the capital gain since the date you've been in Sweden? The tax for the capital gain before the date you arrived in Sweden needs to be paid to someone. Possibly the UK, and then in Sweden they will calculate what's owed as if the asset is in Sweden and deduct off any tax already paid in the UK. But the end result is the same - tax on the full capital gain.
Go to the top of the page
+
Renfeh Hguh
post 12.Jun.2016, 09:47 PM
Post #15
Location: Not in Sweden
Joined: 1.May.2005

QUOTE (Donut @ 12.Jun.2016, 10:30 PM) *
@renfeh I dont think you can only pay tax on the capital gain since the date you've been in Sweden? The tax for the capital gain before the date you arrived in Sweden need ... (show full quote)

If there is tax liable on the capital gain in the UK, then that will obviously be paid in the UK when the property is eventually sold. Sweden should only be able to collect taxes on the gain accrued after residence begins and only if the double tax agreement gives Sweden something to collect on.
Go to the top of the page
+

2 Pages V   1 2 >
Reply to this topic
1 User(s) are reading this topic (1 Guests and 0 Anonymous Users)
0 Members:

 

3,458 Jobs
Click here to start your job search

Popular articles