Can £1m Italian property be used to avoid CGT?

By Steve Lodge, FT.com site

Five years ago my wife and I bought a wreck of a house in Italy, which is now fit to live in and worth £1m. We plan to sell our UK property and move to Italy with our five-year-old son and work for a UK company on a consultancy basis. When our son is old enough for secondary education we might take advantage of my wife and son's Australian passports and move "down under ". What will be the tax situation on the Italian property - could we establish it as our Principal Private Residence to avoid capital gains tax (CGT)?

Filippo Noseda, partner in the international wealth planning group at solicitors Withers, says that Italy does levy CGT, though there is an exemption for property owned for more than five years.

Therefore a future sale of your Italian property will not trigger any Italian CGT, while UK CGT on your Italian property will only be an issue if you remain resident in the UK (or if you come back to the UK within five years and have sold the property in the interim). You ask whether you could elect for Principal Primary Residence status for your Italian property. This is only an issue if you remain resident or ordinarily resident in the UK. Where an individual owns more than one property he may, within two years of acquiring the second, nominate one as his main residence. As you bought your Italian house five years ago, an election would be too late. If you sell your UK house now, your Italian house could qualify as your principal residence for the future so that part of the gain would be free of UK CGT if you subsequently sold it while UK resident.

With regard to inheritance tax, the bad news is that Italy reintroduced gift and succession tax at the end of last year. However, the good news is that your wife and son will benefit from an allowance of €1m each, with the balance being taxed at 4 per cent (plus stamp duty on the property). Assuming you are domiciled in the UK, you will continue to be subject to UK inheritance tax, unless you sell your property in the UK or unless you can show that Italy is the place with which your personal and economic relations are the closest. Your continuing to work for a UK company might be an issue, although it is not necessary to show that you have severed all your links with the UK.

How can I check if I am due a pension from previous employment/s? I'm not even sure some of the companies still exist - they may have been taken over - and what can I do about pension entitlements I should have been offered but wasn't?

Paul Burley, associate director at Smith & Williamson, the investment manager and accountancy group, says that if you don't know how to contact the companies directly you can trace previous employer pension scheme entitlements through the Pension Service which is part of the Department for Work and Pensions (DWP). It has a database of more than 200,000 occupational and personal pension schemes and can be used free of charge to search for a pension scheme you may be a member of.

The Pension Service will need as much information about the pension scheme and employer as you can provide: the full name and address of the employer who ran the occupational pension scheme; whether the employer has changed names, or was part of a larger group; the type of pension scheme you belonged to (for example, an occupational pension scheme, personal pension scheme or a group personal pension scheme); and when you belonged to this pension scheme. You can contact the Pension Service on 0845 6002 537 or online at www.thepensionservice.gov.uk and click on "pension tracing ".

Once you have traced the pension scheme, you will need to write to the scheme administrator with your details including your national insurance number. It should then be able to provide details of the benefits you are entitled to.

A good starting point for chasing up entitlements that weren't awarded would be the Pensions Advisory Service, which can be contacted on 0845 6012923 or www.pensionsadvisoryservice.org.uk.

My wife and I have been married for more than 30 years and have always had joint bank accounts. Our unmortgaged home is also in joint names. We want to give our children a lump sum, but were my wife or I to die within seven years, what would the inheritance tax (IHT) position be given the assets had been jointly held and given? Would the authorities treat the gifts on a 50:50 basis and tax accordingly?

Ian Luder, private client partner at Grant Thornton, says the first £3,000 of gifts made per donor in any tax year are exempt from IHT. If you make gifts to your children now and either of you die within seven years, then IHT would only be due on the excess over £3,000 to the extent that the nil-rate band (currently £300,000) is exceeded by such gifts.

If IHT is payable, "taper relief " may also be available to reduce any liability depending on the number of years that have passed since the gift/s.

The application of IHT in respect of joint accounts can be difficult. A gift out of your joint account wouldn't necessarily be treated as being split 50:50 between you and your wife.

If your home is held as joint tenants then this would be treated for IHT purposes as being held 50:50 and upon death the deceased's share would automatically pass to the survivor.

If you hold the property as tenants-in-common and gift a share to your children then the "gift with reservation " rules would apply if you continue to live in the house. In this case the property would remain in your estate for IHT purposes.

Care should also be taken to ensure you do not fall within the pre-owned assets legislation. This applies where a person makes a gift which they then benefit from at some point in the future. This could include a gift of cash now that is later used by the recipient to buy an asset which the original donor benefits from.

Italy to build nuclear power stations

Written by Richard Owen

The Times

The new centre Right government of Silvio Berlusconi is to return Italy to nuclear power, reversing a 20-year moratorium.

Claudio Scajola, the Industry Minister, said the construction of new nuclear plants would begin within the current legislature, which is expected to last a full five years. The Berlusconi government enjoys commanding majorities in both the Lower House of Parliament and the Senate.

Speaking at the annual assembly of Confindustria, the employers' association, Mr Scajola said: “We can no longer put off an action plan to return to nuclear power. Within this legislature we will lay the first stone for the construction in our country of a group of new-generation nuclear power plants.”

Mr Scajola continued: “Only with nuclear power will we be able to produce clean energy on a large scale, safely, at low cost and without damage to the environment.” The government would, however have to find “credible solutions for the disposal of nuclear waste,” he said.

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Italy abandoned nuclear power after a referendum on the issue in November 1987, amid public alarm after the 1986 Chernobyl disaster, with Italy's environmental lobbies conducting a powerful anti-nuclear campaign. The last nuclear power reactor was closed down in 1990. However, this left Italy reliant on imported energy, with 10 per cent of its electricity coming from nuclear plants across the border in France.

Mr Scajola said Italy needed energy “at competitive prices, in sufficient quantities and under guaranteed conditions.” Its current energy bill of €60 billion was a big factor in Italy's trade deficit, he said, adding: “The time has come to turn the page.” Mr Scajola said Italy would also speed up permits for the construction of natural-gas import plants and promote “renewable energy sources”.

The closing down of Italy's nuclear sector is estimated to have cost nearly €5 billion. Opponents of re-introducing nuclear power say that the risk of Chernobyl-type accidents remains high and that there are no identifiable sites in Italy suitable for new power stations or for storing nuclear waste. Mr Scajola did not indicate where the new nuclear plants would be built.

Umbria Jazz

Stop the press! Umbria Jazz is back for another year and this year the line-up is fantastic. With Sony Rollins, Herbie Hancock, Roy Ayers, Alicia Keys and R.E.M. You can book tickets on-line. Hurry because the brochure is not out yet.

Spartans & Trojans - the elderly in Italy

By and large it must be said that the elderly generation in Italy is something to be marvelled at. More specifically I am referring to the country dwellers, as it is here that they are undoubtedly at their most marvellous. On a regular basis I am reduced to a solemn admittance of the dreadful laziness of my own generation, in the face of these old workhorses who live like Spartans and work like Trojans. You will have seen them on your travels or during your daily life here; picking olives, pruning olive trees, tilling small patches of forsaken earth for a few plum tomatoes. More often than not you will find old ladies rummaging in hedgerows for long forgotten species of wild grass with which to season tonight’s broth, or perhaps even to fend off their husband’s impending attack of gout. Often still referred to as contadini, they do not actually live up to the original definition as people who worked land on behalf of “The Squire”, but to all intents and purposes they live the same life as their forebears 60 years ago. If you happen to own a second home in Italy that has a lot of land, you will probably have someone of this ilk, or preferably even a couple, whom you most likely inherited from the previous owner (who in most cases was a lawyer from Milan who invariably treated anyone living south of Milan as little more than chattels to be ordered about).
Many is the time when I arise and leave the house for work at what seems like an ungodly hour, usually ameliorated by the early sun’s rays lapping at the trees on the hillside above me, as opposed to the incipient drizzle that you tend to find over Britain’s embittered commuters. Feeling good for my ‘early’ start, I then usually discover that my neighbour has already ploughed his entire olive grove, having previously fixed the engine on his ancient and noisome tractor. Not only that, but his wife has strangled, plucked, cleaned and trussed half a dozen home reared quails for the night’s supper, probably by candle light. It is then that you realise the futility of it all; it does not matter how early you wake up, your octogenarian neighbour has always had breakfast before you even opened your eyes. It must be a throwback to the dark post-war years in Italy, when you had the choice of growing/gathering your food or simply not eating. It is naturally testament to the Italians’ wine habit that, of course, the red stuff never seemed to lack anywhere, at any time.
These days abject starvation is not normally on the cards, but for the folk that lived through those lean times there is still no excuse for not making the most of every waking hour and every last ounce of prosciutto or pomodoro. Must be why my father-in-law insists on scraping mould off something rather than throwing it away... To this end they also reap all the benefits of the countryside that they learned from their parents; knowledge that has sadly been all but forgotten by the present generation. If you ever need a tip on wild herbs or especially mushrooms, then look no further than your nearest elderly neighbour for advice (a word of warning about mushrooms: check in a book afterwards, just in case their self-taught wisdom has given way to senility). You may think the wild grass line in the first paragraph was a joke, but it is not; you really do see old ladies, usually in pairs and always highly wizened, stooping under the weight of a bundle of wild grass. To this day I do not know what becomes of these bundles, but can only assume they do not end up as new stuffing for old mattresses.
Italy’s ageing population (apparently second only to Japan for centenarians) and declining birth rate is creating problems in the nation’s cities, where the elderly are seen more as a burden than a source of help or advice. I am certain however, that life in the country is very different, and that the older generation still have a huge input into the social and economic fabric of rural life. There are many families who rely heavily on the nonni (grandparents) for all aspects of domestic life, but particularly childcare and cooking. Very often the nonni will live under the same roof and, although this may not facilitate marital bliss, it does make life for the younger generations that much simpler. Far from being unfairly perceived as a hindrance to everyday life, the elderly generation of rural Italy does more than pull its weight, unless it gets behind the wheel of a battered old Panda, in which case all is lost and despair reigns king...

Jazz

The Umbria Jazz format brings together three different musical dimensions in three different settings।

Evening concerts at the Arena Santa Giuliana: it is here that the most famous names appear, artists who require a larger, more spacious venue।Afternoons and nights at Perugia’s two historic theatres: Teatro Morlacchi and Teatro Pavone.
Two venues dedicated to the different forms – traditional and modern – of what is more strictly jazz Free open-air concerts: the part of the Festival featuring more popular forms of music that have a more immediate appeal for young people and families
This year Umbria Jazz will once again be built around the format that for thirty-five years has been contributing so much to its identity: for ten days, from morning until late at night, there will be music non-stop in some of the most beautiful settings of old Perugia. It is a Festival for attentive, motivated listeners, but there is also plenty of music for those who simply want to spend a peaceful holiday in Umbria with a soundtrack of jazz, soul, R & B, blues, gospel, pop and salsa.
The city of Perugia draws together the different parts of the Festival. The venues in the old town centre; its art and history all contribute to create what an American critic has called “jazz Italian-style”. Perugia’s town squares, gardens, theatres, its spectacular Rocca Paolina (the underground fortress that is one of the city's most famous monuments).

But there is also one more aspect of Umbria Jazz that offers so much to those who are interested in enjoying life. It consists of a combination of good music and fine food that is presented each day in some of the restaurants in the town centre - aperitifs, jazz lunches and dinners, jazz served with wine and gourmet cuisine: all this needs no explanation and is an open invitation to sample the fare on offer.

www.italianproperty.ru

Abode are pleased to announce there new dedicated Russian website www.italianproperty.ru. Nick Ferrand, founder of Abode Srl was quoted as saying: "We are extremely pleased with the opportunity to promote our brand and our clients property directly to the Russian market and in there own language. This is a respect for the Russian people and also a desire to offer our clients global marketing".