CGT and overseas properties after April 2008

The changes to the capital gains tax regime from April 2008 will be of great benefit to many overseas property owners. As overseas properties were rarely trading properties and could not qualify under the furnished holiday lettings rules they seldom qualified for business asset taper relief. This means that the best tax rate a higher rate taxpayer could hope for would be an effective 24% after ten years of ownership. The reduction to 18% will therefore be a nice bonus for many owning overseas property. The main drawbacks could be anyone who os either paying CGT at the basic rate and/or who has owned the property for a long time (in which case the loss of indexation relief could also outweigh the benefit of the new tax rate) However, it's still necessary to take into account the effect of double tax relief. Anyone who is also subject to overseas tax on the gain will be looking for a tax credit against the UK tax due. However if the overseas tax rate is above an effective 24% (in this case) the reduction to 18% would make no difference. You'd still have to pay the overseas tax due which would eliminate the UK liability whether it was at 18% or 24%. It would only be if the liability overseas was less than 24% that the new reduction could be advantageous.