The Government will introduce a 1% surcharge on overseas buyers of UK residential property, despite the fact there is no mention of when this will take effect and no data which proves it's an appropriate policy.
Nimesh Shah, a partner at Blick Rothenberg said, 'The Government wholly recognises that UK property continues to be a positive revenue generator for the Treasury, and the expectation is that the new surcharge will add to tax revenue, but they are rolling this out with no published economic impact data or research to back up the move.'
He continued, 'Given that the majority of those affected by the new surcharge will be based overseas, it is an attractive measure for the Government to introduce without upsetting UK persons.'
However, Nimesh added, 'Given the current economic and political uncertainty, caution needs to be followed and the impact of overseas investment in UK residential property should not be underestimated. A detailed economic analysis should be undertaken before any such measure is introduced.'
The new surcharge will add 1% to the existing Stamp Duty Land Tax ("SDLT") rates (including the 3% surcharge for second properties), meaning that the highest rate of SDLT will be 16%.
It will add to the already complex SDLT regime, which many commentators have suggested needs to be entirely reformed. There are currently 13 different SDLT rates that could apply to the purchase of a UK residential property; in January 2010 there were only four rates of SDLT.
Nimesh said, 'The consultation refers to some 'loose' comments that the introduction of the surcharge is to control house price inflation, which naturally assists the UK indivduals getting on to the housing ladder.'
He added, 'The tone of the consultation suggests a general naivety on the Government's part as to how complex the SDLT regime has become, and adding this new provision will add to the diffuculty. SDLT is a cluttered tax now, as recent Governments have tinkered with it to generate revenue. The new surcharge is yet another complexity to the rules which is not needed, and the efforts would be better spent reforming the SDLT regime completely.'
Nimesh continued, 'The new surcharge creates potential issues for expats moving back to the UK and wanting to purchase a property, and joint purchasers, where one of the couple lives abroad. In the case of joint purchasers, the surcharge will apply in full if one of the parties is a non-UK resident.'
For more information, please contact Nimesh Shah
, or David Barzilay