If I'm selling my house in France to pay debts in Eng will I still pay tax?

Question

Just a thought... if we sell our house in France - which we own outright - to pay off debts in England (which were used to finance the house in the first place and is basically crippling us), will we still have to pay tax on the whole amount? If so, why? Because if we do have to pay tax when we owe so much money isn't that a little imorral of both the French and English governments. Surely it is in the best interest to everyone that we pay off debts first. I could understand that we might have to pay some tax on any money left over - if any!! It just seems double dutch that you work your butt off to earn money - which is taxed - then use that money - which as already been taxed - to pay off loans or finance a property and then when you sell have to give the money back to the government again - why?!! It's my hard earned money and if I'm in debt then obviously I need to pay my debts off first... any advice welcome!

Answer 1

Grin and bear it.  Your logic unfortunately doesn't apply to tax matters.  Capital debts do not offset capital profits.  Looked at another way, if you borrowed to buy the house and haven't repaid the debt, you personally haven't yet paid for the house, so why should you offset the purchase price in working out what your capital gain is?  You're likely to have to pay UK capital gains tax of 18% (not 40% now) of the capital gain.  There might be French tax as well, but if that's also charged on the capital profit you will be able to offset the French tax against the UK tax.

Answer 2

You will have to pay UK capital gains tax. That is 40% of the difference in value from the time you made the purchase to the time you sell. Assuming that the value increased that is. Into this difference you can add in all costs relating to the house such as refurbishing, decorating, upgrading etc. The Tax people have the 1st call on your money followed by the rest. If you owe to a bank they are 2nd in line to the tax. Best of luck and I hope you manage to sort yourself out.

Answer 3

More info required.

Are you UK resident? Domiciled?

Is this your Principal Private Residence?

Are you registered as taxpayers in France.

Post this on www.taxationweb.co.uk when you have the answers to the above.