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Government considers CGT on foreign investors of UK property

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The government is believed to be ‘actively investigating’ charging capital gains tax (CGT) on the sale of property in the UK held by overseas investors, with the new charge potentially being introduced as early as December when chancellor George Osborne delivers his Autumn Statement.

Boodle Hatfield tax solicitor Stephen Green said: ‘Domestic property investors have to pay CGT on profits made, so to an extent the measure would be a levelling of the playing field. However, the challenge for the government might well be in the enforcement and collection of the tax from non-residents. Global investors choose to place their money in the London property market for many reasons – the favourable tax regime is part of the mix – and this measure could have an impact on demand.’

Rosalind Rowe, real estate tax partner at PwC, said: ‘If the government is looking at changes to property tax, the key consideration is the end goal. The big issue in the housing market is lack of supply, but foreign investors tend to be at the top end of the market where supply is less of an issue. If the government is looking to raise revenue, most foreign investors in UK property are in it for the long term so a tax on sale is unlikely to yield much. Another consideration is how extending CGT fits with the government’s “open for business” agenda, as it’s unlikely to send a welcoming message to foreign investors. A cost-benefit assessment would be essential before any decisions are taken.’

Meanwhile, Aaron Burchell, senior associate at Hogan Lovells, said: ‘A further change this year to tax the UK property gains of some or all overseas investors would add to the sense that the UK is a jurisdiction where there is exposure to continuous and material change of law risk. This could be damaging overall for the way in which the UK is perceived internationally, albeit the UK is not alone amongst its OECD peer group in looking at ways of increasing or maintaining tax revenues to pay for the cost of public services.’ 

Issue: 1192
Categories: News , CGT , Private client taxes