Deputy Prime Minister Nick Clegg has signalled that the government is considering introducing capital gains tax (CGT) on the sales of UK homes by foreign owners in the upcoming Autumn Statement, reports Northampton Accountants Harris & Co.
Speaking at his monthly press conference, Clegg said:
‘We certainly want to make sure that people who invest very large amounts of money into property in central London locations, which more often than not stand empty, pay their fair share of tax on those transactions. That is why we are looking at options like a differential application of capital gains tax to those kind of transactions.’
Foreign property investors are currently exempt from paying CGT on any profit from selling property that is not considered their primary residence. Treasury officials have indicated that if implemented, the change in CGT rules could raise around £100m a year.
The proposals are driven partly by the rise in house prices in prime areas in the capital, with estate agents Savills estimating that more than £7bn was spent last year by international investors on properties in London which are perceived as a ‘safe haven’ for funds.
Mike Warburton, a tax partner at Grant Thornton, said:
‘This would be a significant change to the rules that we have had for years. Given the importance of the UK to be open for international business, I think the idea should be approached with great caution.’
It is also not clear what the tax situation would be for UK nationals who live and work overseas and are non-resident but retain a property in the UK which they might wish to sell.