George Osborne is considering slapping new taxes on foreign property investors in an effort to tackle what many see as a house price bubble in London and the South East of Britain.
The Chancellor is actively investigating imposing capital gains tax on foreign owners of British property at the Autumn Statement in December.
The Treasury has already provisionally costed the measures and is awaiting a final decision from Mr Osborne in the coming weeks.
While those living in Britain have to pay capital gains tax (CGT) of 18% or, more commonly, 28%, if they make a profit when reselling all but their main home, non-resident property owners are currently exempt for all their properties.
Britain’s comparatively generous regime is thought to be one of the factors behind the sharp increase in foreign ownership of properties in London.
House prices in London rose by nearly 9% in August, compared with around 2% elsewhere in the UK, according to the Office for National Statistics.
Fast-rising property prices have fuelled fears about a housing bubble in so-called ‘prime’ London areas such as Kensington & Chelsea, where the average home is now worth almost 30 times the average local salary.
The price increases have been driven in part by foreign investment, with around 70% of the most expensive London newly-built properties being bought by non-UK citizens, according to estate agency Knight Frank.
It calculates that 65% of overseas buyers intend to rent their London properties rather than live in them.
At present, these buyers do not have to pay tax on the gains if they go on to sell the property in the future.
Under plans being mulled by Mr Osborne, even overseas buyers would become liable for CGT, as they are in many other countries throughout Europe.
According to the Treasury’s own internal research, the tax would be unlikely to raise significant sums – tens of millions rather than billions – but would address concerns that overseas investors might enjoy favourable treatment when it comes to property investment.
In last year’s Budget, the Chancellor introduced a series of measures levying annual charges on foreign investors who attempt to avoid paying taxes by holding properties through so-called ‘wrapper’ companies.
The charges have brought in more revenue than expected, something the Chancellor is likely to outline at the Autumn Statement.
However, although imposing new capital gains taxes on overseas investors might address concerns about a destabilising influx of cash into the capital, some within Whitehall fear that they would undermine the Government’s message of keeping Britain ‘open for business’.
Others are worried that they would cause a sharp fall in foreign demand for London property, which in turn could undermine the broader UK housing market ahead of the next election.
The Prime Minister’s spokesman said today it was “speculation” to talk of a tax to tackle a London housing bubble.
But he added: “We need a range of approaches on housing which very much recognise in large parts of the country the value of homes has barely increased.”
Source Article from http://uk.news.yahoo.com/house-prices-tax-tackle-london-bubble-091328668–finance.html
House Prices: 'Tax To Tackle London Bubble'
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