As widely anticipated, George Osborne has cast the net of
Capital Gains Tax (CGT) wider than ever before and has
announced plans to tax future capital gains arising from the
disposal of UK residential property by non residents.
In 2013 non resident companies that owned property worth more
than £2 million would be subject to CGT on any gains,
however, non resident individuals remained unaffected. The
Chancellor's announcement indicates that non residents will be
subject to CGT on the disposal of UK residential property in the
same way that UK residents pay CGT on their second homes. The
new CGT would be introduced in April 2015 and would only impact
future gains arising after that date.
Immediately prior to the announcement, Yolanda
Barnes, director of residential research at Savills, said if the
tax were to be introduced it was unlikely to turn overseas
investors away from buying properties in Britain. "Our
analysis of four major world cities - London, New York, Hong Kong,
and Singapore - shows London has been particularly good value for
overseas purchasers in the past."
Richard Kirke, managing director at Colliers Hong Kong agreed
and said: "The London apartment market remains extremely
active. Prices are continuing to move strongly north. A capital
gains tax may squeeze a small proportion of international
investment out - but the London market has significant local demand
so such a measure is unlikely to have a significant impact on
prices," He also said that "A (UK) Capital Gains Tax
for foreign investors would need to be at a draconian level to
mitigate the interest of foreign buyers."
The Government's proposals bring the UK into line with many
other countries, who already tax gains on property regardless of
the residence of the owner.
In good news for the High Street, the Chancellor also announced
a reduction of business rates by £1,000 for small shops,
cafes and pubs (with a rateable value of up to £50,000) and a
new temporary reoccupation relief for new occupiers of retail
premises that have been empty for over 18 months.
Specific details on the Government's proposals will be
available following their consultation, which is to be published in
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