The UK Chancellor of the Exchequer refused to confirm reports that the Government is considering moves to impose Capital Gain tax on foreign investors for property sales in Britain, as a measure to control property prices in London.
At present, foreign investors are exempted from payment of tax which is imposed on UK residents who sell a property that is not their principal residence. The exemption has been treated as an “extraordinary anomaly” by the Government’s Business Secretary. This has given rise to speculation that the Chancellor will take measures in the Autumn Statement which is due in the first week of December, to tax foreign investors on capital gains from property.
There is a perception in the UK that foreign investment is driving up property prices and making it much more difficult for UK residents to buy their own home. According to this view foreign investors are helped by their exemption from capital gains tax. On the other hand UK residents acquiring an investment property for letting are subject to capital gains tax when they sell the property.
Approximately 70 percent of the most expensive new properties in London have gone to foreign investors among them 65 percent of buyers were buying properties for renting out rather than to live in. London property prices rose by 9 percent in August where the national average increase is only 2 percent. This increase in property prices is likely to continue as the economic recovery gains drive.
