The chancellor is preparing to announce that CGT will be charged on British property sold by overseas nationals and expats, meaning that ‘thousands of Britons living abroad face being caught up in a tax raid on wealthy foreigners buying and selling property in the UK’, according to the Telegraph this week.
Chris Groves, partner at law firm Withers, said: ‘What is the difference in the tax position between wealthy foreigners and ex-pats selling UK homes? If, as numerous news reports now suggest, CGT is extended to overseas owners, then would they have the same right as UK persons to elect for properties to be treated as their main residence?
‘If not, then that would presumably be discriminatory and in breach of EU treaties – in which case it would be a simple matter for foreigners and ex-pats alike to elect for their UK second home to be their main residence and therefore be exempt from CGT. Presumably they would also have two years to make that election from the date of the new tax. In fact, only landlords who do not use their UK property as a residence will actually be liable to the charge.
‘UK citizens working abroad are already able to claim their main residence for exemption, even if they rent the house while abroad. UK residents who maintain a base in the UK will simply be able to elect to treat their UK property as their main residence to ensure the relief is still available.
‘What mechanisms will be used to ensure compliance? Will estate agents or solicitors dealing with conveyancing be obliged to withhold a share of the proceeds of sale to ensure payment of tax?
‘If one couples these questions with a likely rebasing of the property to the current value, it is unlikely to generate much tax, and seems to be an empty gesture on the part of a government looking for new tax revenue sources.’
The chancellor is preparing to announce that CGT will be charged on British property sold by overseas nationals and expats, meaning that ‘thousands of Britons living abroad face being caught up in a tax raid on wealthy foreigners buying and selling property in the UK’, according to the Telegraph this week.
Chris Groves, partner at law firm Withers, said: ‘What is the difference in the tax position between wealthy foreigners and ex-pats selling UK homes? If, as numerous news reports now suggest, CGT is extended to overseas owners, then would they have the same right as UK persons to elect for properties to be treated as their main residence?
‘If not, then that would presumably be discriminatory and in breach of EU treaties – in which case it would be a simple matter for foreigners and ex-pats alike to elect for their UK second home to be their main residence and therefore be exempt from CGT. Presumably they would also have two years to make that election from the date of the new tax. In fact, only landlords who do not use their UK property as a residence will actually be liable to the charge.
‘UK citizens working abroad are already able to claim their main residence for exemption, even if they rent the house while abroad. UK residents who maintain a base in the UK will simply be able to elect to treat their UK property as their main residence to ensure the relief is still available.
‘What mechanisms will be used to ensure compliance? Will estate agents or solicitors dealing with conveyancing be obliged to withhold a share of the proceeds of sale to ensure payment of tax?
‘If one couples these questions with a likely rebasing of the property to the current value, it is unlikely to generate much tax, and seems to be an empty gesture on the part of a government looking for new tax revenue sources.’
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