Capital Gains Tax

[Cyclewidow46]

My parents have just sold a property in Portugal. It was a holiday home, they never lived in it and never rented it out. It stood empty for most of the year.
Money is lodged with their financial representative in Portugal to pay the Portuguese Capital Gains Tax.
I'm really not sure what happens with Capital Gains in the UK. Looking at the HMRC website I don't think they need to pay , but it's very confusing. They are both in their 80s so it falls to me to look into it and arrange.
Does anyone have any knowledge or advice about this please? Thanks so much.

Are they UK resident and did they make a gain on the sale? If so they need to pay CGT,, they may be able to offset the Portuguese CGT.

Hi, yes they are UK residents. They did make a gain on the sale. Approx €50,000 has been lodged with the financial representative in readiness for the capital gains bill.

This is a helpful link, do they already complete a self assessment?

https://www.litrg.org.uk/savings-property/capital-gains-tax/capital-gains-tax-reporting

They need to do a self assessment so if they're selling it now, then will be to register by October 25 and submit by January 2026.

If they're not registered for self assessment then need to do that first, then submit the tax return. You could get a quote from a couple of accountants, shouldn't be too much if the rest of their affairs are not too complex.

Check when you have to pay in the uk and there are allowances. I think there’s a time limit or you are fined but I’m not sure there’s much to pay. It’s a small gain and there would have been maintenance costs to offset.

Not sure why they did that, they should have just transferred the money to UK and shut their bank account abroad.

??

They will have a Portuguese cgt liability,even assuming they are non resident in Portugal.

Thank you all for your replies.
Yes, even though they are non-residents in Portugal they are still liable for CGT there and the estimated tax was deducted from the final payment they received from the house sale.

Thank you Bavariamaria, that link is really helpful.

CGT on relevant UK property sales needs to be reported and paid within 60 days of completion on the HMRC website; as I understand it overseas property gains are submitted via your normal tax return at relevant year end though (as CGT used to be done for UK property too).

As to double taxation you will need to see what the double taxation agreement between the UK and Portugal says.

No worries, hope they get something sorted out

They may be able to offset the tax paid in Portugal against UK tax.

If the gain is €50k it might be worth getting professional advice, at least to give them peace of mind.

They don’t need to do self-assessment if not already registered, they can use HMRCs ‘real time’ CGT reporting service - https://www.gov.uk/report-and-pay-your-capital-gains-tax/if-you-have-other-capital-gains-to-report

It’s a small gain and there would have been maintenance costs to offset.

This is incorrect. They will each have an annual exempt amount of £3k, potentially paying tax on the gain of 18% or 24%, less adjustments for double tax relief with Portugal.

Expenditure on enhancements can be treated as an allowable deduction, but NOT maintenance.

I suggest you seek professional advice from a Chartered Accountant, not randoms on MN as there will always be some who make it up based on what Great Uncle Cyril did in 1987.

Thanks everyone. Think we're going to make an appointment with an Accountant to discuss.

I think that’s your best course of action. Try and collate records on acquisition, disposal and any improvement works costs in the meantime as these can all be offset against the gain.

Ok. Enhancements. For most of us that’s splitting hairs a bit and you use the correct description for what you have done. Over 20 years most people enhance a property. As they didn’t let it out snd claim enhancements via tax returns, they should look into engagements.

TCGA 1992 S38. You can't mess with the law. There is a significant difference between maintenance (restoring to its condition without adding economic benefit, such as a boiler service) and enhancing (adding economic benefit, such as installing underfloor heating or a heat pump).

It’s really important to consider this carefully - this gives you some examples of what’s allowable under improvements/ enhancements

https://community.hmrc.gov.uk/customerforums/cgt/94378dca-76b4-ee11-a81c-6045bd0bdee0

The improvement also has to be still in the property providing added value.