Chancellor considers overseas buyer tax
Sky News reported that the chancellor is “actively investigating” the possibility of charging CGT when foreign owners sell their UK homes.
Currently CGT is only paid by UK citizens who make a profit from selling a property that is not their main residence. Basic rate taxpayers currently pay 18% of the profits, while higher rate payers are charged 28%.
Specialist residential investment advisors London Central Portfolio Limited said a potential levy of a CGT on foreign investors had been “an elephant in the room for quite a while”.
Whilst such a move could prove popular with the electorate LCP fears that the tax could prove detrimental at a time when the UK is actively courting foreign investment.
In a statement LPC said: “The key issue is whether the benefits offered by foreign investors outweighs the money forfeited by the exchequer in potential CGT.
“It has been calculated that investors into Central London’s private rented sector alone, bring in £1.2bn per annum into the wider economy.
“This is not just for professional services but supports a huge array of jobs nationwide from paint makers in Barnsley to carpet weavers in Axminster.
“The other critical issue is whether the potential suppression of foreign investment will help mitigate the housing crisis in the UK’s domestic market.
“This is purportedly the aim of the tax, although it is much more likely to be a populist means of raising tax revenue.”
But whilst LCP recognised the problems being caused by the nation’s housing shortage it was sceptical if the introduction of a CGT would help.
LPC said: “Whilst there is no question that the chronic housing shortage must be addressed, the reality is, that by heaping blame on the foreign investor, the government is not confronting the problem.
“Attacking international buyers, particularly those who purchase in new developments, may be fine words but diverts attention from the real issues.
“The average transaction price of a property in England and Wales is under £250,000 whilst new units in Battersea and Vauxhall are averaging £600,000 and in Canary Wharf around £400,000.
“If these units are not sold to foreign investors, they may not sell at all. Not only are these properties largely unaffordable but most domestic buyers have neither the equity nor the desire to wait three years whilst a new development is constructed.
“A practical solution to building large volumes of affordable housing is urgently required. Perhaps unlocking the 1700 acres inherited last year by the Greater London Authority, the largest owner of public land in London, would be a good start.”
“The Government needs to carefully think about whether a CGT on foreign investors is a vote winner but an economy loser.”