Sky News has reported that the Treasury is "actively investigating" imposing capital gains tax (CGT) on foreign owners who resell a UK property. Non-residents are currently exempt from CGT on property sales, while UK residents are subject to CGT on profits made when reselling all but their main homes. CGT is charged at 18% for basic rate taxpayers and 28% for higher rate taxpayers.g
A spokesperson for the Treasury told Out-Law.com that the report was "pre-Autumn Statement speculation".
According to the report, bringing foreign-owned
properties into the scope of CGT would not raise significant sums, but
would address concerns about favourable treatment for overseas property
investors. Foreign property owners are liable for CGT in many other
European countries.
Around 70% of the most expensive newly-built properties
in London are purchased by non-UK citizens, and around 65% of these
buyers intend to rent their properties rather than live in them,
according to estate agency Knight Frank. The Office for National
Statistics (ONS) said that house prices in London rose by nearly 9% in
the year to August, compared with around 2% elsewhere in the UK.
Responding to the report, the British Property
Federation said that the reason behind this increase was the lack of
supply, not foreign buyers. Penalising people who wanted to invest in
the UK would lead to fewer homes being built, as would the related
uncertainty, its chief executive Liz Peace said.
"It makes no sense to slap kneejerk taxes on people who
want to spend money in the UK and contribute to the UK economy," she
said. "Uncertainty of this kind is hugely damaging to Britain's image as
a country that is 'open for business', and far outweighs the paltry
sums which this tax would raise – indeed, it is only with foreign
investment that many London schemes are able to go ahead."
Property expert Suzanne Gill said that the introduction
of CGT on these transactions would be "a real issue, administratively"
for the tax authorities.
"An increase in stamp duty land tax (SDLT) would be less
burdensome, and must be more likely: recent changes in rates have not
affected the property market," she said.
"What does affect the market is uncertainty. An SDLT
announcement can be quickly absorbed, but a period of consultation over
CGT will have an impact - especially following on from the introduction
of the annual tax on enveloped dwellings (ATED) earlier this year," she
said.
Article Source: http://www.out-law.com/en/articles/2013/november/treasury-considering-further-taxes-on-foreign-uk-property-owners-according-to-press-reports/
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