Question:

If I make 100k profit on an overseas property and I'm a UK tax payer, can I put the profit (minus annual CGT) into an off shore account and then bring in money each subsequent year below the CGT limit and avoid paying an tax? If so, is this legal? I would rather pay the tax than be fraudulent.

Answer:

On the basis you're a UK resident domiciliary you would be subject to capital gains tax when you sell the overseas property. If the gain was £100K you'd therefore suffer CGT of around £16K in 2009/2010.

The proceeds could then be brought back to the UK free of UK tax. If you put the cash into an offshore account and then brought it back in the future there would generally be no tax charge on the transfer of the proceeds (as the gain has already been charged to tax).

The only tax charge when you bring proceeds back into the UK in the future could be on any exchange gain if you held the cash overseas in a foreign currency and then made a profit on the conversion back into sterling. In this case as you state the annual exemption could be offset against the exchange gain on the transfer of the proceeds back to the UK.

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