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Old 03.04.2013, 16:18
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Tax relief on unoccupied UK property with mortgage

Hi

Was looking for some advice. Have been living and working in Switzerland for 3 years on B-Permit with wife and 2 kids. I'm the sole earner.

For most of that time we've rented out our mortgaged UK property (at a mi they loss) I.e I've had to send money each month to the UK to subsidise the costs.

This has been pretty painful tbh as a family of 4 the gross income before tax from the property is less than our UK allowance. Net profit is actually a loss. We fill in self-assessments each year.

We've decided to sell the property which is now vacant. I'm now paying the mortgage and all instances to the tune of 2000chf a month from my Swiss salary. Very painful in addition to Swiss rental and costs.

So my question is if I can claim any tax relief here in Switzerland on the mo EU I'm sending to the UK each month ? If so can this be back dated ?

And By declaring this does this make me liable for any tax on the proceeds from the sale when it eventually happens. ? This is our only property

Thanks in advance for your advice
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Old 03.04.2013, 17:44
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Re: Tax relief on unoccupied UK property with mortgage

I would think that if you claim a tax refund this end you have to pay tax that end. And 20% is a pretty penny.
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Old 03.04.2013, 18:18
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Re: Tax relief on unoccupied UK property with mortgage

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I would think that if you claim a tax refund this end you have to pay tax that end. And 20% is a pretty penny.
Sorry, don't get you. If I claim tax relief this end how will that affect my tax in the UK when we are well below our UK allowances ?
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Old 03.04.2013, 18:22
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Re: Tax relief on unoccupied UK property with mortgage

Interesting question - hope someone will be able to get a definitive and helpful answer. My understanding is that you have to declare any property owned abroad, but can deduct costs. Do you intend to go back to UK? If you do, I imagine (I am NOT an expert at all) that you would have to pay tax on any profit - do you think there will be a profit?
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Old 03.04.2013, 18:35
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Re: Tax relief on unoccupied UK property with mortgage

Capital gain on sale will be tax free.

Since you have been running this as a commercial landlord I don't see why you can't declare all the real income (or zero) and all the direct costs incl the mortgage. And not put any amount for notional rent (as would be the case for a holiday home).

I suggest you declare it (you did declare it previously right?), put a note of explanation and argue the toss if queried. Worst they can do is disallow.
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Old 03.04.2013, 18:38
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Re: Tax relief on unoccupied UK property with mortgage

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Sorry, don't get you. If I claim tax relief this end how will that affect my tax in the UK when we are well below our UK allowances ?
If you are sending 2K back every month you will be above your amount.
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Old 03.04.2013, 18:40
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Re: Tax relief on unoccupied UK property with mortgage

You can declare your UK mortgage on your Swiss tax return in the section for debts. As I assume you willing be filing your tax return for 2012 about now you will get tax relief on the payments for thaw whole if that year.

If you are taxed at source and below the magic 120000 chf which means you have to file a tax declaration I'm not sure what you would do. Some cantons allow you to file voluntary declarations and some don't but as your location says Manchester it's difficult to advise you on that.

You won't have to pay any tax in Switzerland when you sell the property as it not located in Switzerland.
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Old 03.04.2013, 18:47
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Re: Tax relief on unoccupied UK property with mortgage

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Interesting question - hope someone will be able to get a definitive and helpful answer. My understanding is that you have to declare any property owned abroad, but can deduct costs. Do you intend to go back to UK? If you do, I imagine (I am NOT an expert at all) that you would have to pay tax on any profit - do you think there will be a profit?
No. Asking price is less than what we paid for it in 2006. Therefore no profit.
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Old 03.04.2013, 18:52
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Re: Tax relief on unoccupied UK property with mortgage

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You can declare your UK mortgage on your Swiss tax return in the section for debts. As I assume you willing be filing your tax return for 2012 about now you will get tax relief on the payments for thaw whole if that year.

If you are taxed at source and below the magic 120000 chf which means you have to file a tax declaration I'm not sure what you would do. Some cantons allow you to file voluntary declarations and some don't but as your location says Manchester it's difficult to advise you on that.

You won't have to pay any tax in Switzerland when you sell the property as it not located in Switzerland.
Thanks. I'm taxed at source currently. Any ideas how I would proceed ? I assume taxable earnings would now be calculated on my current taxable earnings minus the 2000chf I send to UK ? (and yes my gross salary is less than 120k CHF)
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Old 03.04.2013, 19:19
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Re: Tax relief on unoccupied UK property with mortgage

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Thanks. I'm taxed at source currently. Any ideas how I would proceed ? I assume taxable earnings would now be calculated on my current taxable earnings minus the 2000chf I send to UK ? (and yes my gross salary is less than 120k CHF)
I suspect you will be taxed on the notional rental value of the property, so your tax deduction will be way less than the interest element your paying on your mortgage. You may also have a tax liability for previous years rental income in CH.

Out of interest how much %age is your asking price bellow purchase price of 7 years ago?
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Old 03.04.2013, 19:28
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Re: Tax relief on unoccupied UK property with mortgage

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I suspect you will be taxed on the notional rental value of the property, so your tax deduction will be way less than the interest element your paying on your mortgage. You may also have a tax liability for previous years rental income in CH.

Out of interest how much %age is your asking price bellow purchase price of 7 years ago?
About 5% below.

Incidentally, I don't think there canbe any tax implications (in Switzerland) on previous rental income. There is a dual tax agreement between Switzerland and the UK that prevents double taxation on earnings. All previous income from the property is declared under the UK tax system via a self assessment and taxed accordingly (nothi g to be exact as the net profit is way below personal allowance)
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Old 03.04.2013, 19:32
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Re: Tax relief on unoccupied UK property with mortgage

If you were resident in Switzerland, you should have been paying tax on rentable income to CH and not to UK. But it seems the rent was below expenses, so no tax due anyway?
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Old 03.04.2013, 19:34
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Re: Tax relief on unoccupied UK property with mortgage

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If you were resident in Switzerland, you should have been paying tax on rentable income to CH and not to UK. But it seems the rent was below expenses, so no tax due anyway?
Not true. It's an income in the UK and subject to UK tax NOT CH tax. 100% sure of that part. The dual tax arrangement means that itcannotbe (double) taxed in Switzerland
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Old 03.04.2013, 19:36
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Re: Tax relief on unoccupied UK property with mortgage

Has anyone else been in this position where sending costs/expenses each month ? Did they get tax relief ? How to go about it when paying tax at source ?
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Old 03.04.2013, 19:49
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Re: Tax relief on unoccupied UK property with mortgage

I am of the opinion that you would not have a UK Capital Gains tax liability. If you sell the property when you are non UK resident and provided you remain non UK resident for 5 full tax years, you will not be liable to any UK capital gains tax. I also do not believe you would liable to capital gains in CH. However, the value of the property should be added to your "wealth" for that calculation here.
Rental income is taxable in the UK not CH. I'm presuming you are a UK non-resident landlord and therefore either your agent does not withhold tax or you get it paid directly to you by the tenant. Either way you should fill out a tax return for the HMRC and offset all costs (maintenance, mortgage, insurances) against rental income and your personal allowance. Sounds like this comes to a loss though (as far as I understand a non-recoverable unless you can offset it anywhere else on UK taxable income).

Not sure about the costs of the loan versus CH tax although someone suggested this is deductible. I would certainly try.
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Old 03.04.2013, 20:01
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Re: Tax relief on unoccupied UK property with mortgage

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About 5% below.

Incidentally, I don't think there canbe any tax implications (in Switzerland) on previous rental income. There is a dual tax agreement between Switzerland and the UK that prevents double taxation on earnings. All previous income from the property is declared under the UK tax system via a self assessment and taxed accordingly (nothi g to be exact as the net profit is way below personal allowance)
You may well have a CH tax liability, you say the income was below personal allowances in the UK. Double taxation agreements means you will get a credit for any tax paid in the UK against any liability in CH. You paid no tax in the UK so you have no tax credit to deduct in CH. Your opening up a can of worms.....
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Old 03.04.2013, 20:02
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Re: Tax relief on unoccupied UK property with mortgage

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Has anyone else been in this position where sending costs/expenses each month ? Did they get tax relief ? How to go about it when paying tax at source ?
You should be able to claim an allowance on your Council Tax, 50% if the property is empty and 100% if unlivable/unfurnished. Any loss you make on your UK Tax Assessment can be carried forward to the next year. Only when you complete tax forms here can you claim the loss here.

How long has this been going on? Why not rent it out or sell it?

I have had more outgoings but it didn't go on for more than a month while it was getting ready for renting.
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Old 03.04.2013, 20:05
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Re: Tax relief on unoccupied UK property with mortgage

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Not true. It's an income in the UK and subject to UK tax NOT CH tax. 100% sure of that part. The dual tax arrangement means that itcannotbe (double) taxed in Switzerland
Your liable to tax in the UK on UK income & your liable to tax in CH on world wide income. As you say no tax has been paid in the UK, you almost certainly do a a Swiss liability.
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Old 03.04.2013, 20:11
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Re: Tax relief on unoccupied UK property with mortgage

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I am of the opinion that you would not have a UK Capital Gains tax liability. If you sell the property when you are non UK resident and provided you remain non UK resident for 5 full tax years, you will not be liable to any UK capital gains tax. I also do not believe you would liable to capital gains in CH. However, the value of the property should be added to your "wealth" for that calculation here.
Rental income is taxable in the UK not CH. I'm presuming you are a UK non-resident landlord and therefore either your agent does not withhold tax or you get it paid directly to you by the tenant. Either way you should fill out a tax return for the HMRC and offset all costs (maintenance, mortgage, insurances) against rental income and your personal allowance. Sounds like this comes to a loss though (as far as I understand a non-recoverable unless you can offset it anywhere else on UK taxable income).

Not sure about the costs of the loan versus CH tax although someone suggested this is deductible. I would certainly try.
Cheers. Agree with all the above. As it was our only home in UK and not a 2nd home it would not be liable to capital gains tax. Infact, as the asking price is less than the original purchase price there are no "gains" to tax anyway. It is purely the equity from 7 years of mortgage repayments.

All I come is declared via HMRC self assessment and associated costs offset against income to bring net profit well below personal allowance.

So I'm happy with the UK end of the tax situation. What I'm not clear on us if I can obtain tax relief on my Swiss salary against the cost I need to send to the UK to subsidise the mortgage, life insurances,council tax (yes the buggers make me 100% pay council tax on my unoccupied property !) etc...
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Old 03.04.2013, 20:17
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Re: Tax relief on unoccupied UK property with mortgage

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Your liable to tax in the UK on UK income & your liable to tax in CH on world wide income. As you say no tax has been paid in the UK, you almost certainly do a a Swiss liability.
That is cometely untrue. There is a double tax agreement between the UK and a switzerland . Tax on rental income is paid in the UK. I do this via self assessment. As the net profit is below the annual allowance I pay no tax. But this is still my tax assessment for the year. I cannot then be double taxed in Switzerland.

My situation anyway is that the property is unoccupied and up for sale. So the question is can I offset my expenses against my Swiss income as I no longer have a UK income to offset them against I.e can I take advantage of the double tax arrangement in this way ?
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