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Chancellor targets tax raid on Wealthy Foreigners

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Chancellor targets tax raid on Wealthy Foreigners

Post  Panda on Tue 19 Nov - 9:31


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Thousands of Britons caught up in tax raid on wealthy foreigners

Chancellor prepares to announce that capital gains tax will be charged on British property sold by overseas nationals and expats





Chancellor prepares to announce that capital gains tax will be charged on British property sold by overseas nationals and expats

George Osborne, the Chancellor, is preparing to announce that capital gains tax will be charged on British property sold by overseas nationals and expats Photo: PAUL GROVER FOR THE TELEGRAPH







By Peter Dominiczak, Political Correspondent

10:00PM GMT 18 Nov 2013



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Thousands of Britons living abroad face being caught up in a tax raid on wealthy foreigners buying and selling property in the UK.


George Osborne, the Chancellor, is preparing to announce that capital gains tax will be charged on British property sold by overseas nationals and expats.


The Coalition plan was disclosed by Nick Clegg, the Deputy Prime Minister, who said that the proposals would ensure that wealthy foreigners who buy and sell British property “pay their fair share”.


However, it is understood that Mr Clegg’s plan would also apply to British people living abroad and who are classed as non-residents here, but still own property in the UK.


Approximately five million Britons live abroad. It is not known how many of these still own a property here and are non-resident.


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Tax experts warned that the measures could have significant consequences for Britons who go abroad to work while retaining property in the UK that they may wish to sell.

The new measures are designed to address concerns that a housing bubble is being created by foreign buyers who regard flats and houses, particularly in London and the South East, as a safe investment.

London house prices are far outstripping inflation because of such fierce demand for prime property among global buyers, pricing many British families out of the market.

More than £7 billion was spent last year by international investors on properties in London.

The Coalition has grappled with ways of increasing taxes on multi-million pound properties.

It is understood that the latest proposal would raise less than £100 million for the Treasury.

Mr Clegg stressed that the Coalition did not want to “pull up the drawbridge” to overseas investment, but he said it was essential that wealthy foreigners are not exempt from property taxes paid by Britons.

British home owners currently have to pay capital gains tax if they make a profit when they sell a property that is not deemed to be their main residence.

However, foreign investors such as the Russian oligarchs and Middle Eastern oil billionaires buying up UK homes are exempt from tax on all properties, making London homes in particular an attractive option.

The new policy would impose a capital-gains tax of 28 per cent on the sale of second homes in the UK that are owned by overseas investors, including expats, it is understood.

“We are an open economy and we don’t want to pull up the drawbridge – that would be bad for the country,” Mr Clegg said.

“But we certainly want to make sure that people who invest very large amounts of money into properties in central London locations, which more often than not then stand empty, pay their fair share of tax on those transactions.

“That’s why we are looking at options like the differential application of capital gains tax to those kinds of transactions. Decisions on that haven’t yet been made.”

Tax experts warned on Monday night that the changes could reduce the attractiveness of the UK property market.

The capital gains tax will be seen as a symbolic gesture by Mr Clegg, who is furious at the Conservative Party’s refusal to support Lib Dems plans to impose a levy on all UK properties valued over £2 million.

The Deputy Prime Minister blamed “downright prejudice” in the Tory party for the failure to support the so-called “mansion tax”.

Mr Clegg stressed that making foreigners pay the capital gains tax was not a “surrogate to a more rational way of taxing” high-value property. Lib Dem sources said that they would continue to push for a mansion tax.

Mark Pearce, an expert in domestic and international tax at the law firm Thomas Eggar, said: “Lots of Britons who move away either because of work commitments or retirement retain a presence in London in order to visit family and friends.

“It is going to have significant consequences for those who work in international companies who may go away for five to 10 years but plan on returning who for whatever reason may need to release capital by selling their homes in the near future.”

He added: “This seems a desperate attempt to increase tax revenues by rushing through potentially complex legislation without adequate consultation.”

Mike Warburton, a tax partner at Grant Thornton, said: “This would be a significant change to the rules that we have had for years. Given the importance of the UK to be open for international business, I think the idea should be approached with great caution.”

Figures earlier this month showed that British households pay the highest property taxes in the developed world, with the amount of stamp duty paid on the average house sale now almost double the level it was at the peak of the last housing boom.

UK residents pay twice as much as the international average, a report by the think tank Policy Exchange found.

Property taxes in Britain cost the equivalent of 4.1 per cent of gross domestic product – around £70 billion — in 2011, the think tank said. The OECD average is 1.8 per cent.

A Treasury spokesman said: “We do not comment ahead of the Autumn Statement.”

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Re: Chancellor targets tax raid on Wealthy Foreigners

Post  Panda on Tue 19 Nov - 9:38

"Tax experts warned that the measures could have significant consequences for Britons who go abroad to work while retaining property in the UK that they may wish to sell"

Trust the Accountants to complain, they make the most money advising clients on how to avoid tax.

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