I have been living in Dubai for the last four years. I bought the house in 2006 with my husband and we lived there for 14 years, and then rented it out through a property management company in 2022. The rent does not cover the mortgage payments, so we have been constantly making a loss and the tenant refuses to leave. We bought the house for £249,000 and we are selling it for £360,000 cash, although it’s valued at £471,000. How do I work out if I need to pay capital gains tax (CGT)? 

Arthur Weller replies:  

Since you are non-UK resident, you are subject to the non-resident CGT rules. These state that your taxable gain is calculated on the increase in value from April 2015 to the date of the sale. If the house is worth £471,000 today and was bought for £249,000 in 2006, then by a straight-line interpolation, we can say that it was worth £360,000 in April 2015. (i.e., (471 - 249) = 222. (9 / 18) * 222 = 101. 249 + 101 = 360.) It sounds as though you were under pressure to sell because this property was causing you losses. If so, this could be classified as a 'bad bargain at arm's length' (see HMRC’s Capital Gains Manual at CG14541), so even though you sold for well below the current market value, the market value rule does not apply. Since your base cost is £360,000, and you sold for £360,000, you have not made a capital gain, so there is no CGT liability.