Estate Agents Warn That New
HMRC Tax Announcement
Will Put Off Willing Overseas Property Buyers
The announcement made by HMRC about altering the Government position on taxation of using foreign capital as collateral for borrowings could have a significant impact on the residential market in UK cities, especially London, according one estate agent.
Cluttons’ Head of Residential Development, Julian Briant, reckons that the new rules over the use of foreign capital in order to be able to obtain a loan in the UK will now result in a taxable remittance, making mortgages less attractive for investors hoping to use money held abroad as security.Mr Briant says “This could have a major bearing on foreign buyers wishing to invest in UK property as the majority tend to hold funds in off-shore accounts. It is not just international buyers who will be affected, some UK property investors also choose to keep money in offshore accounts due to more attractive interest rates. Time will tell whether the legislation will influence overall demand for UK property, which remains a primary go-to asset for international buyers. London’s position as a highly attractive place to live is secure, although some foreign purchasers may be caught off-guard by the government’s decision, which has largely gone under the radar. I would encourage a review in six months’ time to understand the effect of this unexpected change in tax law, perhaps followed by a consultation with the property industry to ensure that we are all aligned in our goals and expectations,”
The estate agents’ warning comes at a time when the property market slowdown has been well documented in the capital, although the rest of the country is still catching up with property prices continuing to increase.
HMRC’s taxation decision means that funds from overseas investors that are intended to be used in this way will now contribute to an individual’s overall UK income and be taxed in the same way.
This could deter foreign nationals from choosing UK property as an investment vehicle, however that leaves more property bargains for UK based property investors.
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