Sat, 02 Nov 13
The move from Chancellor of the Exchequer George Osborne would aim to tackle rising house prices in both London and the South East region, which are being driven up by a shortage of houses available to domestic buyers, but the industry has warned against the potential levy.
The British Property Federation argues that the tax would act as a disincentive to overseas buyers, which would then discourage sales and, as a result, slow down demand for construction too.
“House prices are rising due to a chronic shortage of new homes, not because of foreign investors, and until this supply issue is dealt with it makes no sense to slap kneejerk taxes on people who want to spend money in the UK and contribute to the UK economy,” commented Liz Peace, chief executive of the BPF.
“Uncertainty of this kind is hugely damaging to Britain’s image as a country that is open for business and far outweighs the paltry sums which this tax would raise. Indeed it is only with foreign investment that many London schemes are able to go ahead,” she added.
“We know from bitter experience that some foreign investors will have seen these headlines and will already be thinking twice about whether or not to invest in the UK.”
Funds and asset management firm London Central Portfolio Limited echoed their concerns.
“The exemption of CGT for foreign owners unarguably represents an inequality with domestic buyers. The flip side of this exemption, however, is that it is a tax incentive, which attracts foreign investors into the UK and represents a competitive edge over other global capitals,” they wrote in a statement.
“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.”
Stephen Green, a tax solicitor at Boodle Hatfield, commented: “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.”
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