Expats caught in property tax raid

Updated: 
For sale signThousands of Britons living abroad look set to be hit by plans designed to ensure that wealthy foreigners who buy and sell British property "pay their fair share".

The warning comes after deputy prime minister Nick Clegg said the government was considering charging capital gains tax on UK flats and houses sold by overseas nationals.

British homeowners have to pay capital gains tax at a rate of 28% if they make a profit when they sell a property that is not their main residence.

However, foreign investors - including super-rich Russian oligarchs and Middle Eastern oil billionaires - are exempt from all property taxes, and have been snapping up homes in the capital as a result.

Not only is this unfair to British investors, it is also thought to be creating a housing bubble in London, where properties worth more than £7 billion were bought by international investors last year. And this in turn is pricing many British families out of the market.

Clegg said: "We are an open economy and we don't want to pull up the drawbridge – that would be bad for the country.

"But we certainly want to make sure that people who invest very large amounts of money into properties in central London locations, which more often than not then stand empty, pay their fair share of tax on those transactions."

It is true that London house prices have been soaring recently. October asking prices soared by 10% in a matter of weeks, according to figures from property website Rightmove.

However, wealthy foreigners buying and selling property in the UK are not the only ones who will end up paying more on any property sales.

Clegg's plans also look likely to apply to British people who live abroad and are classed as non-residents, but still own property in the UK.

And this has raised concerns among tax experts that the proposals could end up hitting many of the five million or so Britons who live abroad.

Mark Pearce, an expert in domestic and international tax at the law firm Thomas Eggar, told the Daily Telegraph: "Lots of Britons who move away either because of work commitments or retirement retain a presence in London in order to visit family and friends.

"It is going to have significant consequences for those who work in international companies who may go away for five to 10 years but plan on returning who for whatever reason may need to release capital by selling their homes in the near future."

The government claims that final decisions "haven't yet been made". But there is perhaps a case for expats considering putting their UK homes on the market to do so sooner rather than later - especially with the Chancellor's December 4 Autumn Statement fast approaching.

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