Property change will affect divorcees or anyone who sells house and doesn't buy immediately
December 05, 2013
The £9bn of measures to counteract avoidance and evasion was one of the more striking notes in the Statement. But the detail shows this is actually a collection of a variety of measures over the next six years. Much of this was expected but there are one or two worrying developments for the man on the street, as the Chancellor's made a small but potentially symbolically significant reduction in the amount of relief that's available on the sale of your main home if there's a break between moving and selling. This could affect people moving jobs or getting divorced. Or anyone hoping to fund their retirement with the sale of their home, will be worried now that by the time they get to retirement the rules will have changed again.
The government has confirmed that capital gains tax will be extended to non-residents who own residential property. This extends the previous measure to bring non-resident companies within the scope of capital gains tax on 'high value' residential property. So now both high value and low value residential property will be taxed and regardless of whether it is owned by companies or not.
This will be seen by non-resident individuals as a broken promise. They were strongly encouraged by the Government to take their properties out of companies so that a future sale of bricks and mortar (rather than shares) is subject to stamp duty. The quid pro quo was that they would not be subject to the annual charge (mansion tax lite) or capital gains tax. Having de-enveloped as they were asked to do, they will in fact be subject to capital gains tax after all.
Whilst UK property will remain an attractive asset class for investors, the Government should not underestimate the impact on confidence in the real estate fund/investor community.
The Government will consult on how the tax can be collected from people outside the UK. Other countries like France tackle this problem by imposing a withholding tax on the notary who executes the sale and collects the sale proceeds. Perhaps the Government will require UK conveyancers to account for withholding tax on sales of property by non-residents. Such a move will not be well received.