In an attempt to reduce the advantages of structures that are located offshore, the UK is targeting non-UK property buyers with taxes for capital-gains. The government is planning to get the tax for capital-gains introduced on non-British commercial property buyers. This is expected to potentially disrupt money flow into the office buildings in London especially after Brexit.
The tax is expected to be levied on the gains that have been made by non-UK residents especially on the sales of numerous types of real estate in the country. This also extends existing rules that used to be applicable only to homes. This was based on the published consultation documents alongside the budget for Philip Hammond, Chancellor of Exchequer, on Wednesday. That being said though, some of the institutional investors might be exempted from the changes in taxation which are expected to be rolled out by the government in the year 2019.
Collier’s chief economist Walter Boettcher said that this move is expected to have considerable effects in the country’s investment market, most specifically, London. There have been talks about pension funds being exempted from the tax changes. However, indications and clarity are still being awaited especially when it comes to the reaction of the market on the introduction of these changes.
It should be noted that the property market in London is being dominated by investors that hail from overseas. They are often lured into the British capital by the presence of huge building as well as the long leases that are being awarded to the major corporations. The city is also known for the stability of its legal environment which a lot of foreign investors find ideal. About 75% of the total investments in central London is accounted for by foreign investors.
The country is considered the largest market for commercial property all over Europe. In the first six months of the year 2017 alone. It has managed to attract a total of 26.7 bn Euros in terms of investment. It should be noted that this was even after the country voted for Brexit. This is a little more than the invested amount in Germany which is at 26.1 bn.
There are deep concerns about the announcement of the chancellor pertaining to the imposition of the changes to taxation considering how this now affects those investors that are non-residents of the country. This is, after all, being seen as a move that will likely jeopardise investment that is very much needed in the country. The UK has always been particularly effective when it comes to attracting capital from overseas investments where majority of the profits are used to regenerate cities and towns. However, the country does not impose full taxation on non-residents which has since put them at an advantage over British residents.
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