Query about Capital Gains

[Haily111]

Hello all. Here is the scenario of my query.

My parents live in germany, they bought a house over here so i could live in it. I do not pay them rent. We are looking at buying a house in a nicer area. (which will most definately cost more) My query is will they still have to pay Capital Gains although a Family member is living in the property and we are buying another house, and there isn't any rent involved. So in theory there is no 'gain' as such is there. Am just getting rather confused.

Thank you

I think probably yes. They will be selling an asset at a profit (the current house), the fact they are buying you another one (I assume?) makes little difference.

There might be something they could do in terms of giving you a life interest in the property, which would help to protect them from cap gains, but they need to consult a specialist here to talk about that.

If your parents were non-UK resident when they bought the house and remain non-UK resident then there should be no liability to UK capital gains tax. They will of course have to examine their German tax position as they will more than likely be liable to German cgt.

If they bought the house when they were UK resident then the gain may still be free of UK tax depending on how long they have subsequently been non-resident (ie more than 5 years).

Thank you two for that. They weren't resident when they bought the house. It was bought solely for me and my dd to live in.

Tribpot what is life interest and where can i find some info on that?

Thank you

Haily - you could maybe start here - but the law has changed recently and I'm not up to speed on the current procedure.

I did mean capital gains in Germany - I got slammed for this in Sweden when I sold my house, even though it was my primary residence, ouch.

Oh ok so then in theory we wont have enything to do with the UK CGT but we will in germany. Does it have anything to do with where their mortgage is?

If they sell the house they are probably liable in UK as it has never been their principal residence and if they are UK domicile, non-resident for tax purposes. There may be a way around it if they "gifted" it to you so you could sell it but that relies on your parents surviving 7 years afterwards and you need to take proper tax advice before attempting to go down that route as rules have recently tightened. Were one of them to die within the 7 years the IR could track it back and the estate/surviving parent could still be deemed liable. Hence why good advice is necessary.

This site may help. Seems to depend partly on how long they have been non-res etc

Ok thank you for the info!!