Budget 2017: How will the UK Government’s proposed capital gains tax changes impact overseas real estate investors?27 Nov 2017
Following last week’s Budget announcement, institutional investors in UK real estate could now face a capital gains tax levy on the disposal of all types of property – not just domestic, explains Ocorian’s Richard Hansford.
Accompanied by a wide-ranging consultation document, the UK Government has announced its intention to extend capital gains tax paid by non-residents to all types of UK real estate, not just residential, in a bid to ensure all overseas investors pay their fair share of tax.
The UK is the largest commercial property market in Europe and the change, scheduled for April 2019, will make all gains made on any UK property subject to UK tax (with exceptions for pension funds and SWFs). Properties not already chargeable to tax will be rebased to market value in April 2019 for this purpose.
So, will this development, which was not widely expected across the real estate sector, now deter overseas investors from investing in UK property market? Some will see this change as the UK now adopting a consistent approach with other developed countries, while others may view it as lessening the appeal of UK-based property investments.
Historically, the UK real estate market had proved resilient and successful in drawing overseas investment but with these new levies – at a time of need for increased investment in infrastructure and housing projects – has the Chancellor made the right call? Only time will tell.