Autumn Statement 2013 and the housing market

by Neil Patterson

13:31 PM, 5th December 2013
About 7 years ago

Autumn Statement 2013 and the housing market

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Autumn Statement 2013 and the housing market

The Chancellor, George Osborne in his Autumn Statement 2013 has confirmed that as from April 2015 foreign owners of UK property will pay Capital Gains Tax.

Foreign investment into the London property market in particular has been hotly debated including in Property118 as a cause for concern. The London market has been rising out of step with the rest of the country with fears of a housing bubble and inflationary pressures putting at risk the UK’s economic recovery.

Indeed it lead to the Bank of England withdrawing its support of the Funding for Lending Scheme to the whole of the UK’s housing market recently in an effort to cool future prices.

Mr 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.”

However I do think it is less about what is fair and more about protecting us from boom and bust pressures caused by the transient nature of foreign investment. Wealthy investors in particular from China and Russia have been buying properties in London as have Eurozone citizens hedging against a possible break up of the single currency.

There was also acknowledgement by Mr Osborne that housing supply must be encouraged to support a stable market and that £1billion will be offered in loans to boost housing developments in Manchester and Leeds, among other sites. Also that the Help to Buy Scheme will be further supported increasing demand and hopefully encouraging supply with Aldermore and Virgin Money adding to the availability of loans to residential purchasers.

Also the Housing Revenue Account borrowing limit which allows councils to borrow against its housing stock is to rise by £300m allowing greater flexibility in the provision of Social Housing. Councils will also be encouraged to sell off the most expensive social housing, Council Right to Buy Schemes will be further supported and rundown urban housing estates regenerated.

On the Banking side, which also has a direct effect on the supply and demand of housing, from the 1st of January 2014, the rate of the bank levy will rise to 0.156%. This is estimated to raise £2.7bn in 2014-15 and £2.9bn each year from 2015-16. Mr Osborne said that it was only right that the banking system continues to support the UK’s recovery.

£100 million of the fines raised from the Banking Libor manipulation scandal will also be given to military and emergency services charities.

Looking purely at Macro economics, growth forecasts for GDP this year increased from 0.6% to 1.4%. Next year revised up from 1.8% to 2.4%, and also up for the following four years to 2.2%, 2.6%, 2.7% and 2.7%. This would place GDP growth exactly where the Bank of England is targeting for the medium term without putting inflationary pressure on interest rates.

Government borrowing and how it is spending public finances and raising taxes is of a wider more political nature and not something I really want to get into in this report.Autumn statement 2013



Comments

Adam Hosker

14:16 PM, 5th December 2013
About 7 years ago

Good News, except their is a solid loophole.
A EX-PAT company can sell its SHARES, instead of the assets it holds to change ownership - therefore avoiding any Capital Gains Tax.

Companies have until April 2014 to re-structure their companies. Each SPV to own a single asset.

14:19 PM, 5th December 2013
About 7 years ago

No removal of mortgage interest relief for buy to let borrowers, as had been forecast!!

Jerry Jones

14:33 PM, 5th December 2013
About 7 years ago

So that only leaves dying as a CGT-free exit strategy; I preferred the idea of going to live in the sun.

Neil Patterson

16:20 PM, 5th December 2013
About 7 years ago

Reply to the comment left by "Adam Hosker" at "05/12/2013 - 14:16":

The Government also uncapped the budget to HMRC for investigating tax avoidance and they have also committed to closing loopholes.

It remains to be seen how effective they will be though.

Adam Hosker

16:31 PM, 5th December 2013
About 7 years ago

@Neil Patterson

What I allude to is not Tax Evasion but instead Tax Planning, in that a company incorporated in Ras al-Khaimah Tax Free Zone can be sold legally to any person outside of the purview of HMRC.

In addition as Ras al-Khaimah allows shadow directors, its' only a change in the Ultimate Beneficial Owner - (not the listed owner in their version of companies house). All the tenants or hmrc will see/if anything would be a "change in management".

Its a loophole that is almost impossible to close and impossible detect when utilised. It is a bit of a shame as, im not keen on out capital city being "owned" by foreigners although welcome their investment.

The flaw in this is requirement of Finance and the tenancies of banks to require Personal Guarantee of the shareholders. That is not an issue for many foreign owners though.

I think this is more of a headline to catch of the NOVICE foreign investors. Rather than the big guys whom are involved and afford such tax planning advice.

Mark Alexander

16:32 PM, 5th December 2013
About 7 years ago

Reply to the comment left by "Adam Hosker" at "05/12/2013 - 14:16":

Very clever Adam, that will keep the creative accountants busy for a while!
.

Neil Patterson

16:42 PM, 5th December 2013
About 7 years ago

Reply to the comment left by "Adam Hosker" at "05/12/2013 - 16:31":

Hi Adam,

You are correct especially with offshore companies it is very difficult to close all these loopholes, but maybe we should just get tough like the French and Russians would do and confiscate assets until they can prove they paid the tax they owe. We will see if they decide to get tough and mean what they say.

Or maybe we should just go the completely opposite route and reduce corporation tax to 10% forget about CGT for foreign companies and just watch the money role in 🙂

Shakeel Ahmad

18:45 PM, 5th December 2013
About 7 years ago

Now it is only fair that indexation is re introduced. This will release a lot of properties on the market.

Chris Amis

17:18 PM, 6th December 2013
About 7 years ago

Did I hear right that they sneaked thru halving the 3 year extension on PPR relief?

For the accidental landlords, who might not even know they had it, you could live in a house, move to a new house and keep the old house for up to 3 years without capital gains, now I think it is just 18 months.

Sneaky....

Shakeel Ahmad

18:35 PM, 6th December 2013
About 7 years ago

I have not heard any such thing. I dont think this will discourage the MP's from flipping for the MP's !!!!

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