ACCA ATX ^UK Syllabus A2. Chargeable gains - UK Located Land and Buildings - Past Papers ^{5 / 6}

Your client, Dan, requires advice on the potential chargeable gain arising on his proposed disposal of his UK house.

Dan:
– Is domiciled in the country of Skarta.
– Is unmarried, and has no children.
– First became resident in the UK on 1 July 2012.
– Left the UK on 1 January 2016 to go travelling.
– Returned to the UK for the first time on 15 May 2017, when his father was taken ill.
– Intends to work part time in the UK throughout the month of July 2017 only.
– Will remain in the UK until 5 August 2017, when he intends to move permanently to Skarta.

Dan – disposal of his UK house:
– Dan purchased a house in the UK on 1 October 2012 for £286,000, where he lived until 1 January 2016.
– He has not lived in the house since this date.
– He allowed his father, Noah, to live in the house, rent-free, until his father’s death.
– He has agreed to sell the UK house on 1 August 2017 for £318,000.
– The house was valued at £297,000 on 5 April 2015.

Required:
(b) (ii) Calculate the chargeable gain arising on the disposal of Dan’s UK house on 1 August 2017 under the residential property rules applicable to non-UK residents. Dan will not elect to be taxed on the whole of the gain but will elect for the gain to be time-apportioned if it is beneficial to do so. (6 marks)

Your manager has been advising a client, Waverley, on his plans to sell his business. An email from your manager setting out the current situation and some notes on the tax system in the country of Surferia are set out below:

Email from your manager – dated 8 September 2016
Waverley

Waverley was born in 1976. He divorced his wife in 2014. His three children, all of whom are under 18, live with his ex-wife in the UK.

Residence status
Waverley has always been resident and domiciled in the UK, but it is likely to be beneficial for him to be non-UK resident for the tax year 2017/18.

Investment property
Waverley owns an investment property located in the UK. The property is a residential house, which is tenanted under a lease which expires on 31 October 2021. This house has never been Waverley’s principal private residence and it is not available for him to use. Waverley plans to sell this house as soon as possible following the end of the lease. He will then give the proceeds from the sale to his sister

Email from your manager – dated 8 September 2016 
Please carry out the following work:

(c) Investment property
– Explain the capital gains tax implications in the tax year 2021/22 of the sale of the investment property, assuming that it gives rise to a chargeable gain and that Waverley is resident only in the country of Surferia in that tax year.

Tax manager

Notes on the tax system in the country of Surferia
– Individuals who are resident in Surferia are subject to capital gains tax on disposals of worldwide assets at the rate of 12%. There is no annual exempt amount.
– For the purposes of capital gains tax in Surferia, Waverley’s chargeable gains will be the same as they would be in the UK.
– The payment date for capital gains tax in Surferia is the same as the payment date for capital gains tax in the UK.
– There is no inheritance tax in Surferia. 
– There is a double tax treaty between the UK and Surferia.

Required: Carry out the work requested in the email from your manager. 
(c) Investment property.