Liquid error: wrong number of arguments (2 for 1) Autumn statement: Experts say overseas investors will be unfazed by new CGT tax | Marsh & Parsons Sales and Lettings Estate Agents London

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Autumn statement: Experts say overseas investors will be unfazed by new CGT tax

Thu 05 Dec 2013

Autumn statement: Experts say overseas investors will be unfazed by new CGT tax

Capital gains tax for foreign buyers is no deterrent and just brings UK into line with Paris and New York, warn

agentsAn increase in the tax paid by overseas investors on UK property is unlikely to deter wealthy buyers

stalking the capital's housing market, according to tax experts and estate agents.The autumn statement closed a

loophole which allows property investors outside the UK to make profits on the sale of homes in this country

without facing a capital gains tax (CGT) charge.The new "oligarch tax" will bring the tax treatment of such

investors into line with that of UK residents in an effort to cool the London housing market, where prices have

leapt by almost 10% since last year.At present, only UK citizens and residents pay CGT, which is levied on profits

made from second homes. Basic-rate taxpayers pay 18% of the profits, while higher rate payers hand over

28%.Up to now a foreign buyer who bought a property for 1m and later sold it for 3m could pocket the proceeds

tax-free, while someone based in the UK would face a bill of up to 560,000.In recent years the UK property

market has grown particularly appealing to overseas investors seeking a safe haven for their cash. About half of

the new developments in central London's most upmarket boroughs are being sold to foreign buyers.The UK's

property taxation system had been cited as a reason for the appeal, and there were calls for the government to

impose more taxes on the country's richest home buyers.Addressing parliament, the chancellor, George Osborne,

said: "Britain is an open country that welcomes investment from all over the world, including investment in our

residential property. But it's not right that those who live in this country pay capital gains tax when they sell a

home that is not their primary residence, while those who don't live here do not."The change is set to come into

force in April 2015, and the government anticipates it will bring in 125m in its first three years. However it seems

unlikely the change will dampen investors' enthusiasm and lead to a flurry of "for sale" signs across Kensington

and Chelsea in London.Peter Rollings, chief executive of the estate agent Marsh & Parsons, said that if the

introduction of CGT quelled calls for a mansion tax it could actually boost the market. "London is still a much

more attractive and easier place to buy property than many other cities around the world, and demand for the

best properties will remain fierce."Tax experts at Pinsent Mason said double-taxation rules meant that in some

cases investors would just be shifting the tax they paid from their resident country to the UK, without having to

pay more.Furthermore, a separate change to the way CGT is charged when a homeowner lets a property that

was formally their main residence is set to net the Treasury more money. It could catch also out accidental

landlords and wealthy homeowners attempting to cash in on rising rents and house prices.The profits on second

homes are subject to CGT, but private residence relief reduces the amount paid if an investor has previously

owned a property as their main home. The reduction is currently applied for the last three years of ownership, but

in a surprise move the chancellor said that period would be halved from April 2014.The change is designed to

stop those with multiple homes cashing in on a relief designed to give homeowners a grace period if they found

themselves forced to move on and unable to sell up, as the rules allow investors to "flip" their prime residence

between properties. It will bring in an estimated 360m by the 2018/19 tax year.The changes means that

someone selling a property that they previously lived in as their principle private residence and have rented out

for the past three years will now face a bill.On a property bought for 100,000 a decade ago, rented for the last

three years and then sold for 180,000, this could mean a tax bill of 3,360 for a higher-rate taxpayer making the

gain after April 2014, against nothing now.Lucy Brennan, a partner at the accountants Saffery Champness, said

the change would come as a shock to sellers. "For those moving out because of a divorce, this is likely to be a

valuable relief, given that the sale of the home is not necessarily under their control. In times when property

prices are predicted to sharply increase, paying tax on an extra 18 months of gain could be substantial."The

Treasury said it expected very few accidental landlords to be caught out by the change as there were other reliefs

in place which would minimise their tax bills, including the overall CGT allowance of 11,000.

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