Changes to taxation of foreign owned property in the UK will mean that sales will now be subject to capital gains tax, bringing the UK regime into line with many other countries.
Under the current regime, only those UK residents who own second homes are subject capital gains tax when they sell them, but there are some concessions if they have lived in the property within the last three years. There is also some uncertainty about the position where a holiday let business is concerned, due to recent moves by HM Revenue and Customs to treat these as investments and not businesses.
Announcing the much forecast change in his Autumn Statement, to be implemented in April 2015, Chancellor George Osborne emphasised the unfairness of a system which favoured foreign residents, but which includes expatriate Britons, over UK residents.
The move follows increasing concerns about wealthy foreign buyers of second and more properties, especially in London, contributing to continuing inflation in residential property prices, pricing many workers out of the market in many parts of the city.
Britain, and London in particular, is seen as a safe haven for money. In a volatile and troubled world, as individuals and companies from Russia and China in particular, and others in Europe, fearing a break-up of the Eurozone, have been investing in UK property.
However, leading property agents operating in the high-end central London property market do not see the tax having a major impact on the current rate of foreign investment in the city, long-term.
The move may actually have the adverse effect of boosting sales and property prices in the short-term as the tax would fall due on price increases only after the implementation in April 2015.
The tax may prove difficult to collect from some foreign residents, for example in some African countries, and could result in a surge of owners claiming the UK property as their main residence. But the move could represent a boom for surveyors and valuers and of course, the revenue raised will be a welcome contribution to the government’s coffers.