Inheritance Tax and Capital Gains on foreign property

[nc107]

Hi all,

Looking for a bit of advise please; I have tried looking on t'net but as its a subject I'm not that familiar with I'm getting a little confused.

My partner is Italian (but UK domiciled) and was gifted a house in Rome by her parents 10 years ago. Unfortunately her last parent has passed away recently but we are unsure of the tax implications of selling the house and bringing the money into the UK.

The Italian side (IHT and CG) is pretty straight forwards, I'm assuming that as the house was gifted more than 7 years ago there are no UK IHT implications but what about CG on the increase in value? There is also the issue of avoiding, if possible, being taxed twice.


We will when it comes to it, take some professional tax advise but any help or pointers appreciated to set us on the right road

[Eric Mc]

Do you mean "Tax Resident" or "Domicile" when you say "domicile"?

They are different things in law.

Where does your girlfriend actually live?

[nc107]

My ignorance of the subject shining through!!

She lives and works in UK, has done for last 20 years. Still an Italian citizen but has post brexit settled status.

[Eric Mc]

It sounds like she is UK Tax Resident but probably still Italian Domicile.

The general rule is that UK tax residents are liable to CGT on the sale of any asset they sell or dispose of for a consideration. That includes overseas properties.
If the person is UK Resident AND UK Domicile, they are liable in full.

If they are UK Tax Resident but have a foreign domicile, they are taxed on a remittance basis - so they are taxed when the proceeds on the sale are transferred to a UK bank account.

https://www.gov.uk/government/publications/remitta...

[nc107]

Thanks for replying Eric. That helps and sheds some more light on the situation for us. Some thinking to do armed with that information.
thanks

[LC23]

Please look at the deemed domicile rules on this. They will give a different answer.

[DaveA8]

LC23 said:

Please look at the deemed domicile rules on this. They will give a different answer.

This is not advice but it is likely she has acquired a UK domicile (after 20yrs and a relationship here), actually looking to sell the house will further indicate she has limited ties with Italy.
The more relevant question is what the tax in Italy will be and perhaps that is inescapable or there is none, a gift from parents is not taxable (except 7yrs etc)
It is probably more important to clarify in Italy