Stamp Duty land tax for overseas buyers

It is high time that overseas buyers paid more Stamp Duty Land Tax (SDLT) and Council Tax when they buy and own UK property says David Lawrenson of www.LettingFocus.com. The additional rate for SDLT should be at least 3 per cent, the same as UK landlords and second home buyers already pay. These extra taxes would likely have little impact on demand from overseas buyers, thus the revenue raised would be very high – and could be used to tackle homelessness and rough sleeping.

Today, I’m going to look at Stamp Duty Land Tax for overseas buyers of UK property.

I am just in the process of buying my first buy to let property since the government decreed that us nasty buy to let landlords would be clobbered with an extra 3 per cent SDLT on top of what ordinary mortals have to pay.

That’s all fine and dandy – and yes I know it is easier to clobber small landlords for the cash, because just like small businesses it is easier to hit the small guy for big increases in rates (in the case of your dying high street) and taxes (for the rest of us), than to properly tax the likes of big international internet businesses, which falls into the “too hard to do” category. So, yes, I get the big picture. 

But what really made me laugh was the government form that the solicitor sent me to fill in, in which, in order to be exempt from the extra 3 per cent clobber, I would have had to declare that “I did not own a property in the UK or anywhere else in the world“.

The bit about “anywhere else in the world” amused me.  I can just imagine the overseas buyers of UK property who are based in China, India, the Middle East or wherever, dutifully telling HMRC that “Yes, of course, I already own a place in Beijing, Bombay or Bahrain, so please tax me an extra 3 per cent, Mr Taxman”.

Yeah, right, I’m sure they will all do that!

Consultation on Stamp Duty Land Tax for Overseas Buyers

The government is presently consulting on making overseas buyers pay another 1 per cent SDLT on top of the normal SDLT rate, with the money being used to help the problems of homelessness and rough sleeping on the UK’s streets. Why not 3 per cent?, you might  ask – which would make a level playing field with UK based buy to let and second home buyers. Why not indeed?

Well, it is thoughtful of the government to at least be consulting on this, I guess. But you wonder why this was not considered before. Most other countries have for years imposed additional taxes on foreign nationals buying and owning property in their countries. So why not the UK? It would be a huge revenue earner and would make the UK only very marginally less attractive for the shadier sort of foreign investor using the UK to launder their ill-gotten gains.

And the money would be big. To show how big, one only has to consider the Hamptons International Buyer and Seller Survey which shows that 57 per cent of homes bought in prime central London (PCL) in the second half of 2018 were purchased by an “international buyer” – i.e. someone based abroad. This is actually the highest level since the second half of 2012, which shows that despite all the worries and hand wringing, Brexit is certainly not putting off the foreign buyer of UK homes.

Interestingly, 20 per cent of the international purchasers were based in EU states, which is a big increase on the second half of 2017, when they formed only 10 per cent of foreign buyers.

But it’s not just in prime areas where international buyers are to be found. Taking Greater London as a whole in the last half year of 2018, the proportion of homes bought by international buyers was 36 per cent, up from 21 per cent in the second half of 2015, which was, of course, before the referendum on whether the UK should leave the EU. In Greater London too, the same pattern of increased numbers of EU buyers was evident – rising from 8 per cent in H2 2015 to 14 per cent of international buyers now.

The Exchange Rate and Overseas Buyers of UK Property

No doubt the fall of Sterling, post-Brexit, which makes property here cheaper to buyers abroad, has something to do with the increase in international buyers.  But the fact remains, that for too long foreign buyers have had it too easy here in the UK – and this situation seems very unfair, especially now that home based second home buyers and buy to let investors get hit with a 3 per cent additional charge.

The consultation on the additional international buyers levy ends on 6th May. You should take the time to reply to it – and if you do so, you should suggest that the levy ought to be 3 per cent to ensure a level playing field with home- based buyers. And at the same time, suggest international buyers pay an extra duty on actually owning a property – this could be added to Council Tax, which is a teeny tax compared to similar local taxes elsewhere in the developed world.

To show just how teeny UK Council Tax is compared to what one would pay towards local services in Singapore, Shanghai or St Petersburg, you should know that one of the most frequent questions from international buyers to the likes of Hamptons, Savills and other up market estate agents and buyer’s agents is about the local council tax. Foreign buyers regularly call their agents up to query if they should not be paying a whole lot more – and whether they have they missed something!

Overseas Buyers of UK Property Should Pay More Tax

So, the conclusion is that foreign buyers of UK property could easily pay a lot more tax when they buy and hold UK property, without them really noticing it and without it having any impact at all on the volume of housing transactions or the Tory’s cherished house prices. If Theresa May and her conservative government is serious about helping the “ordinary people” and at the same time doing something for the homeless, this is one place she could start.

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