U.S. Resident Selling U.K. Property: does the U.K. automatically report this to the IRS

[Anglo Dutch Trust]

U.S. Resident Selling/Transferring U.K. Property: does the U.K. automatically report this to the IRS? The proceeds would not been going to the U.S. I have been told “no” by a professional but I have been told otherwise by an American in the U.K. Certainly the Data Protection Act would not allow it but a special tax agreement may be a loophole to this. Does anyone have insight on this? Thank you

 

[Martin Everson]

As a non-resident selling a UK property you have to file a return with HMRC within 30 days of the sale whether capital gains tax is owned or not.

Report and pay Capital Gains Tax on UK property - Report and pay Capital Gains Tax on UK property - GOV.UK

www.tax.service.gov.uk

As a U.S Person if the proceeds of the property sale passes through your account it will be reported under FATCA anyway.

In other words the two factors above would leave a paper trial. And at some point in future you will end up like Boris Johnson having to pay US taxes on a property sale as IRS does not play if at all any taxes are owned.

P.S Seek another professional firm for advice and read my signature...lol.

 

[Anglo Dutch Trust]

As a non-resident selling a UK property you have to file a return with HMRC within 30 days of the sale whether capital gains tax is owned or not.

Report and pay Capital Gains Tax on UK property - Report and pay Capital Gains Tax on UK property - GOV.UK

www.tax.service.gov.uk

As a U.S Person if the proceeds of the property sale passes through your account it will be reported under FATCA anyway.

In other words the two factors above would leave a paper trial. And at some point in future you will end up like Boris Johnson having to pay US taxes on a property sale as IRS does not play if at all any taxes are owned.

P.S Seek another professional firm for advice and read my signature...lol.

Thank you very kindly for your detailed reply. I remember the Boris Johnson incident. This U.K. property is owned by a U.S. resident with zero bank accounts outside the US. It would be a property transfer to a relative who is a non U.S. person so no money would go to the US - this is allowed to avoid 40% U.K. inheritance tax. All relevant U.K. capital gains would be paid which has already been calculated. I believe in this case it will NOT be reported to the US and there is no formal mechanism for that apart from paper trails with US or foreign accounts under FATCA etc. which there won’t be.

 

[Martin Everson]

It would be a property transfer to a relative who is a non U.S. person so no money would go to the US - this is allowed to avoid 40% U.K.

Sorry you mean the U.S Person is gifting the property not transferring it. The later generally means a payment will take place and a lot more paperwork. By gifting to i.e a child it would just be a TR1 and an ID1 form to sign with a solicitor if I remember. Then U.S person has to live for another 7 years after gifting otherwise IHT at 40% is due on the property. The TR1 is public information by the way so anyone snooping the land register can see he owned the property for decades to come.

All relevant U.K. capital gains would be paid which has already been calculated.

Ok so you do mean transfer and not gifting then.

I believe in this case it will NOT be reported to the US and there is no formal mechanism for that apart from paper trails with US or foreign accounts under FATCA etc. which there won’t be.

That sounds about right. But the ID1 form can be shared with other departments such as HMRC.

P.S Please note he may have an obligation to report all of this to IRS. So I would get professional advice here and not listen to my commentary.