Dominic Coyle Q&A: New UK capital gains on property sale by non-residents

I have a property in the UK for which I think the sale will go through before April 6th. So it will probably not be affected by the recent change on capital gains for non-UK residents selling property.

My query is more with regard to whether I would have to pay tax on the profit I will make between my purchase and sale prices, given that this UK property is my only owned property worldwide.

I moved back to Ireland four years ago and have been Irish resident for tax purposes since. I would be hoping to use the money from this sale to buy a home in Ireland and so would expect that my only property would not be taxable, but maybe it is. Would you be able to clarify for me please?

Mr AK, email

Under Irish tax rules, a person’s principal private residence – ie their home – is not subject to capital gains tax. Though you are not living there for the past few years, it is, as you state, the only property you own, and therefore continues to constitute the family home.

Irish tax law does differentiate in cases where that property has been vacated and subsequently rented out. In that case, you would be liable to tax here on a portion of the gain made on the sale. Even if it has been rented out, however, the last year prior to sale is deemed to be one of owner occupied, even if you have been living here and it was rented out for the 12 months prior to sale.

The bottom line is whether you let out the property in the four years since you came home. If so, that fraction of ownership is liable to Irish capital gains tax. For instance, if you owned the home for 20 years and let it out for the last four, 3/20ths of the capital gain (allowing for the exemption on the last year of ownership) would be subject to the tax.

Of course, you would be exempt also to tax on the first €1,270 of taxable gain under Irish rules.

Getting back to the UK, they have, as you say, introduced a new capital gains tax regime for non-residents selling property they own in the UK. Foreign ownership has become a big issue in the UK, especially in parts of London.

Essentially, under the new rules, non-residents will have to pay capital gains tax on the sale of their UK properties - but only on any gain in value from the date the new rules came into force last April.

Anyway, the good news from your perspective is that the UK rules have a provision for private residence relief. This means that the last 18 months of ownership is discounted from any calculation of capital gains tax liability.

As the new rules came into force on April 5th last, that means you will not have any worries about UK tax, provided you sell before October 6th. So you have a little time to play with.

As always, there are some exceptions to this relief. One concerns letting out part of the home or using it for business during your ownership. The other, which I assume is not relevant to you, concerns homes on sites of more than 5,000m sq – just over an acre.

Getting a form to claim refund under double taxation agreement I would like to get the address of the UK revenue department that deals with questions about double taxation between Ireland and Britain so that I can get a form to make a small claim. Do you know where I should contact?

Mr JN, Mayo

The form you are looking for is called Form DT-Individual and, like most of these things nowadays, you tend to download it from a website, in this case http://goo.gl/zukAOR.

As with all these things, there are plenty of details required, and you then have to send the form to your own Irish tax office. They then complete the bottom section on page 1 of the form and, ideally, send it on to Her Majesty’s Revenue & Customs.

However, it is more likely that they will return the form for you to post. In that case, the address required is: HM Revenue & Customs, Pay As You Earn and Self Assessment, BX9 1AS, England. If you do need to contact them, the number is +44-135-5359022.

To short-circuit the system just in case you do not have ready access to a computer, I am sending you a copy of the relevant form to the address you provided.

Mixed up between Verizon and Vodafone I don't know whether I'm totally confused or not. I had Vodafone shares and, while I was in England, I heard on the radio that the closing for sale of shares was up. Anyhow when I got home on February 19th, I said I'd chance my arm and send back the form. Lo and behold, a cheque arrive from Computershare this morning for €1,300.

This week I had an email saying I could authorise the sale online and giving me a pin number. So maybe I’m talking about the wrong share? Just curiosity. I’m happy I got something back.

Mr JR, email

A little confused maybe. Because you owned Vodafone shares, you also received shares in another telecoms group ,Verizon, when Vodafone sold out of a US joint venture business in early 2014.

These Verizon shares are the ones that the company’s share registrar, Computershare, was (up to February 23rd) offering to sell at a lower commission rate than usual. The form you sent back in haste on your return to Dublin was almost certainly relating to that transaction.

Coincidentally, Vodafone, which has an army of small Irish investors dating back to the original Telecom Éireann flotation, is also now offering to sell your shares for nothing (if you have fewer than 50 shares) or for lower than usual commission charges otherwise.

The Vodafone sale process only kicked off on February 23rd and will run until late May. That probably explains the recent email.

Certainly, the Verizon special offer closed last week, and I gather information that is due to be sent to shareholders about future trading arrangements will not be sent out until the latter part of next week, so this email seems related to Vodafone.

And, without bursting your bubble, the €1,300 you received does not alter the fact that you have still lost out financially on the investment. It’d be worth noting down your loss so that you can set it against any other capital gain this year – or in future years, if necessary.

Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara St, D2, or email dcoyle@irishtimes.com.

This column is a reader service and is not intended to replace professional advice.