UK property sale, CGT, residency

[Russ104]

Hi,
new to the forum and first time posting.
I'm a UK national, long term resident of Japan with PR, and a Japanese spouse.
Several years ago, before the loophole was closed, I used the depreciation on my property in UK to offset my income tax here in Japan.
I'm now possibly just entering retirement (57 y.o. and just been made redundant), and am considering selling my UK property to release some funds to support retirement.
As the property was fully depreciated, I understand I would need to pay CGT in Japan on the full sale price (after off-setting CGT paid in UK) - if I stay as a resident in Japan. So I'm thinking of breaking tax residency in Japan, and going back to UK for a few years, when I can sell the property without having to pay CGT in Japan. The plan would be to then return to Japan for "final" retirement.
I've heard that to be considered non-resident of Japan, it has to be clear that the "centre" of my life" is outside of Japan. Furthermore, if there is evidence to suggest that the period of residence outside of Japan is temporary (eg. if spouse stays in Japan, or if continue to own a property in Japan where family members live etc.), then I could still be considered as Japan resident for tax purposes, even for the period living outside Japan. So lots of ties would need to be broken.
If I got the 4 year re-entry permit, that could be seen as evidence of only temporary absence from Japan, so may have to give up visa status and start again...

Has anyone had experience with a situation like this? Any advice to consider?

(I have lots of related questions, but may break it up into different topics....)

[Deep Blue]

This is quite specialist, I would recommend you take professional advice given how big an impact this is going to have on your life. Uprooting your whole family for several years is a big choice!

I also plan something similar - leaving Japan after I retire, taking all my capital gains while non-resident and then moving back as a new resident. I made sure not to accept PR though, which makes this an easier route for me.

[Russ104]

Thanks for your reply Deep Blue. I've seen many of your comments on different topics in the forum, so am happy to get your thoughts.
I have an accountant who has given me some advice. What other professional advice could I consider?
Why do you think it's easier for you not having PR?

As I've lived in Japan most of my adult life, we always planned to spend some period of time living in UK after retirement. ie. it's not just a ploy to minimize Japan CGT.
But I'm still nervous about it, and trying to make sure I've covered all bases - hense trying to get thoughts from this forum.
Thanks

[Deep Blue]

I’d try one of the big tax firms like Withers. I’ve paid them for written advice on tax and residency before, when I was living outside of Japan with my wife and we wanted to move some assets between ourselves and wanted to be sure we wouldn’t be ensnared by gift tax.

The advice doesn’t come cheap - they are likely to charge you a few hours work at something like 100,000 yen an hour but if you’re talking about hundreds of thousands of pounds proceeds from selling a UK house it might be worth paying for.
Normally

They’ll give you a free consult for 15-30 minutes, show you their fee schedule and then give you an estimate for the hours prep they’ll need. I think we paid HKD40k so about US5k for their advice.

Other places you could consider are the local tax office - I’ve never been to one but others here recommend them and the big advantage is it is completely free.

[Wales4rugbyWC23]

You would also have the issue of Capital gains tax in the UK because you can only claim primary residency if you have continually lived there. As above posts have said best to consult with accounting professionals. It might get complicated in both the UK ans Japan.

I would be interested in how this turns out since I have also used the depreciation for my UK rentals.

[Deep Blue]

You would also have the issue of Capital gains tax in the UK because you can only claim primary residency if you have continually lived there.

Has this changed? I sold a flat in, I think, 2016 which I did not have to pay CGT on. I’d owned it since 2001 and left the UK permanently in 2003 so definitely not continually resident.

[Deep Blue]

Oh, I see you are right. This changed in 2015 and for existing owned property the book value was set as at 2015 rather than having this grandfathered all the way back.

I do now remember this was part of my decision to sell, to avoid accruing a big CGT bill down the line.

[Beaglehound]

The OP may intend to live in the UK property for however long it takes to have it classed as his primary residence. Otherwise the CGT differential between Japan and the UK may not be that large?

[Wales4rugbyWC23]

Oh, I see you are right. This changed in 2015 and for existing owned property the book value was set as at 2015 rather than having this grandfathered all the way back.

I do now remember this was part of my decision to sell, to avoid accruing a big CGT bill down the line.

I remember my letting agents trying to flog me a 'professional valuation' because of this change in rules in 2015. I had only bought the flat a few years before and there had been no real change in value, so I thought it was pointless.

[Russ104]

[/quote][/quote]

You would also have the issue of Capital gains tax in the UK because you can only claim primary residency if you have continually lived there. As above posts have said best to consult with accounting professionals. It might get complicated in both the UK ans Japan.