The UK tax system has long come under fire by home buyers and property investors alike. Now Berkely Group has joined those claiming it needs an overhaul. Head of the firm Rob Perrins explained in the Daily Telegraph that existing processes and rules are considerably flawed. Consequently, the entire system needs rebuilding and overhauled in a coherent fashion. Currently, he claims, ministers create uncertainty by making ad-hoc changes. These include plans for capital gains tax for foreign second-home owners, the newspaper revealed.
Mr Perrins has come down heavily on these plans, stating that at a time when the UK should be encouraging investment, it is cultivating an environment of "uncertainty and change". The British Property Federation (BPF) has also come out against plans to tax foreign investors, claiming that instead of helping to keep a cap on prices, it will damage the country's reputation as open for business. While BPF acknowledges that action needs to be taken to prevent a bubble in the south, levying capital gains tax on overseas buyers is not the answer.
The main problem behind arguably out of control value growth is a lack of supply, opposed to foreign investors inflating prices. BPF claims that by taxing investors, the government will actually discourage additional stock from being built. The organisation agrees with Mr Perrins that the planned, ad-hoc changes to the tax system constitute a political risk, creating market uncertainty that will harm property investment.
Liz Peace, chief executive of the BPF, said: "House prices are rising due to a chronic shortage of new homes, not because of foreign investors, and until this supply issue is dealt with it makes no sense to slap kneejerk taxes on people who want to spend money in the UK and contribute to the UK economy. Uncertainty of this kind is hugely damaging to Britain's image as a country that is 'open for business', and far outweighs the paltry sums which this tax would raise."
To create a more functional and effective tax system, Mr Perrins recommends higher council tax on prime London properties, the Daily Telegraph reported. He also suggests making stamp duty payable by sellers and not buyers. However, for any changes to work all facets of the tax system will need reforming together.
- Thursday 07 November 2013